Pharmacy Kiosk Business Plan 2006
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Pharmacy Kiosk Business Plan 2006

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This was a business plan I wrote in 2006 around using kiosks to dispense pre-packed prescriptions.

This was a business plan I wrote in 2006 around using kiosks to dispense pre-packed prescriptions.

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Pharmacy Kiosk Business Plan 2006 Pharmacy Kiosk Business Plan 2006 Document Transcript

  • BUSINESS PLAN 2006 (Note: This is a copy of the business plan extracted from the final PPM used in raising capital. CentralScript no longer exist.) George Van Antwerp gvanantwerp@silverlink.com www.georgevanantwerp.com 314-517-8915
  • Proprietary & Confidential © 2006 CentralScript, Inc.2 Table of Contents EXECUTIVE SUMMARY..................................................................................................................................3 BUSINESS MODEL.............................................................................................................................................6 MARKET FACTS................................................................................................................................................6 PRESCRIPTION PROCESS WITH CENTRALSCRIPT .............................................................................11 Table 1: Prescription Process at Kiosk ...................................................................................... 12 DUANE READE EXPERIENCE......................................................................................................................12 KIOSK EVOLUTION........................................................................................................................................13 Table 2: Kiosk Modules – Customer, Pain Point, Value ........................................................... 14 MARKETING PLAN – PRODUCT, PLACE, PROMOTION, AND PRICE ..............................................15 Table 3: Pharmacy ROI ............................................................................................................. 17 TECHNOLOGY.................................................................................................................................................18 PILOT STRATEGY...........................................................................................................................................18 GROWTH PLAN ...............................................................................................................................................19 PIPELINE...........................................................................................................................................................20 ST. LOUIS DEPLOYMENT EXAMPLE ........................................................................................................20 CHANNEL SALES ............................................................................................................................................21 DIRECT SALES.................................................................................................................................................21 PARTNERSHIPS ...............................................................................................................................................21 COMPETITION.................................................................................................................................................21 BARRIERS TO ENTRY....................................................................................................................................23 EXIT STRATEGY .............................................................................................................................................23 FINANCIALS .....................................................................................................................................................24 Table 4: Per Unit Economics..................................................................................................... 24 Table 5: 5-year Proforma........................................................................................................... 25 MANAGEMENT TEAM...................................................................................................................................26 ADVISORS AND DIRECTORS .......................................................................................................................27 USE OF PROCEEDS.........................................................................................................................................27 START-UP PLAN ..............................................................................................................................................29 KEY MILESTONES..........................................................................................................................................30 RISKS FACTORS..............................................................................................................................................30 Risks Related to Our Business................................................................................................... 30 Risks Related to this Offering.................................................................................................... 31 APPENDIX H: FINANCIALS ..........................................................................................................................32
  • Proprietary & Confidential © 2006 CentralScript, Inc.3 Executive Summary CentralScript provides interactive pharmacy kiosks that extend the retail pharmacy presence and offer an efficient solution for capturing incremental marketshare. By addressing the pharmacist shortage in the US and creating a more efficient process, CentralScript addresses multiple pain points for patients, payors, and pharmacies. With the pharmacy market forecasted to grow to $520B in 2014 and the pharmacist shortage to grow to 157,000 by 2020, there is a significant opportunity to use technology to change the industry. The existing brick and mortar solution cannot sustain itself. The initial CentralScript kiosks are a proven technology currently in operation in over 80 locations in New York including Citigroup, Viacom, several hospitals, and Duane Reade pharmacies. They has been used for over 3 years to increase market share for Duane Reade, increase convenience for the patient and free up the pharmacist’s time to be spent filling prescriptions and counseling patients. DrugMax, a retail pharmacy chain in Connecticut, recently began using the kiosks and has forecasted a $150,000 to $250,000 annual incremental revenue per kiosk. CentralScript is initially licensing the technology and upon completion of the initial operations will attempt to negotiate an intellectual property arrangement with Duane Reade, if appropriate, to move to the next generation of the pharmacy kiosk (patent pending). CentralScript will use this initial period to finalize business requirements based on usage patterns and identify the highest points of value for our clients. Some of the modifications that are anticipated include adding a barcode reader for refills, increasing the self-service and healthcare content functions, and building a modular system for dispensing samples, prepackaged medications, or controlled over-the-counter products like Sudafed. CentralScript will develop and operate the kiosks and provide an outsourced pharmacy call center. Patients can use the kiosks 24x7 to drop off new prescriptions or request refills, talk to a pharmacy technician or pharmacist in multiple languages, and pay their copayment. And, in the next version, the patient will be able to receive their pre-packaged prescriptions through the kiosk. In order to minimize the patient’s time, CentralScript performs the adjudication process at the point of initial interaction with the patient to proactively address any pharmacy system edits and works with the patient and subsequently the prescriber to identify the lowest cost solution (e.g., moving to a generic drug). This “clean” prescription is data entered directly into the participating pharmacy’s system or sent directly to their fulfillment system (e.g., central fill pharmacy, automated dispensing unit). The patient then simply shows up at the pharmacy to pick up the prescription or waits for it to be mailed to them (if it is not available in the kiosk). By working with the participating pharmacies and the leading pharmacy software companies (Per-Se Technologies (formerly NDC Health), PDX, and QS/1), CentralScript anticipates that it will be able to use Internet technology to create a new session or build an interface for each claim where they will process the prescription under the selected pharmacies National Association of Boards of Pharmacy (NABP) number and their third party adjudication rates. This will minimize the data integration and will allow CentralScript to act as a centralized processing site for the pharmacy selected by the patient. View slide
  • Proprietary & Confidential © 2006 CentralScript, Inc.4 CentralScript’s primary customer is the retail pharmacy that is looking to compete more aggressively on both a cost and service perspective with the large chains (e.g., 24x7, multi-lingual support) and the mail order pharmacy companies (e.g., trend management) to profitably capture marketshare and increase foot traffic. Since the value of a new customer can exceed $550 per year in incremental gross margin, this has significant upside for pharmacies. Additionally, by using the centralized front- end services (data entry, physician calls, adjudication), CentralScript allows retail pharmacies to take advantage of an industry best practice being used by the mail order pharmacies. As their utilization grows, they will not have to grow their staff to meet the future demands of the market. Additionally, at slower stores, this will allow them to better manage their productivity today. The secondary customer, which is also our channel sales partner, is the Pharmacy Benefit Managers (PBMs) and the Managed Care Organizations (MCOs). They will place the kiosks in employer sites and leverage our virtual on-site pharmacy to lower costs, increase stickiness, and accelerate consumer driven healthcare by creating a vehicle to drive consumer behavior (e.g., move to generics, increase mail utilization, shift share to preferred retail pharmacies). As CentralScript further develops the kiosk model, the planned additions for dispensing controlled over-the-counter products like Sudafed, prepackaged medications, and/or samples will make this a very valuable solution for retailers and medical facilities respectively. This will also open additional revenue sources by working with pharmaceutical manufacturers and consumer packaged goods (CPG) companies that can now channel advertising (e.g., banner ads, coupons) and pay for “shelf space”. CentralScript addresses several pain points: 1. Eliminates the patient’s need to stop by the pharmacy multiple times to pick up and drop off their prescription and/or come back to find out that their prescription was rejected due to clinical or insurance edits; 2. Allows the pharmacy to focus on dispensing and counseling versus dealing with all of the edits, physician calls, and insurance issues which impact most new prescriptions; 3. Helps pharmacies address their staffing issues which are forecasted to grow to a shortage of 157,000 pharmacists in the US by 2020; 4. Helps retail pharmacies become more competitive, extend their retail presence into medical buildings and other locations, and increase their productivity per location; and 5. Provides payors with a patient friendly tool for helping direct care to the lowest cost alternative and better enable patients to manage their own healthcare dollars. CentralScript will generate revenue from: 1. A monthly rental charge to retail pharmacies, PBMs, and MCOs for each kiosk; 2. A per transaction charge to each pharmacy for each prescription order sent to them; and 3. Advertising revenue from brand pharmaceutical manufacturers (and eventually consumer packaged goods companies) for shifting marketshare to preferred products through counterdetailing and use of coupons and other materials. The CentralScript management team is composed of (1) George Van Antwerp who recently led the mail order product team for Express Scripts and has also worked for Firepond, an Internet software company in Boston, and Ernst & Young LLP in St. Louis; (2) Larry Pyles who was the CIO of Edison Brothers Stores and Thrifty Drugs and has worked in senior IT and operational roles at numerous retail companies; and (3) Biju Kulathakal who owns a IT development company and was one of the founders of GetAMovie, the DVD kiosk company that McDonalds acquired and has been View slide
  • Proprietary & Confidential © 2006 CentralScript, Inc.5 re-branded as Redbox. The team is also working with a local pharmacist who will join the team upon funding. Additionally, CentralScript has assembled a Board of Advisors with varied experience in the industry and key functional areas including Dr. Tom Patton, the President of the St. Louis College of Pharmacy; Earl Hurst, VP of Sales for RxAmerica (a PBM owned by Longs Drugs); Gary Levine, VP of Marketing and Business Development for Mercy Health Plans; David Azad, Principal at Galen Partners (a healthcare private equity company); and Callaway Ludington Zuccarello, owner of Callaway & Company (a marketing company). CentralScript intends to locate their call center in St. Louis working with an outsourcing company that provides call center infrastructure and focus on serving regional pharmacy chains and grocery stores while partnering with the PBMs and MCOs to drive additional volume. CentralScript is currently talking with several pharmacies and PBMs about an initial implementation in October 2006 and is scheduling an employer “demo” with the St. Louis Business Area Coalition on Health. CentralScript is raising $1,500,000 of funding to build out the initial operations, hire key staff, support the first clients, and develop a prototype for the next generation of the kiosk. Assuming the initial ramp-up validates the model and the technology, CentralScript anticipates that it will be looking to raise another $12M in Series A financing in month 10 to build intellectual property, build out the new kiosk, and rollout nationally. Using only the existing model which does not include dispensing nor does it optimize marketing revenue, CentralScript forecasts profitability in year four and forecasts that the company will generate $88M in revenue with a 15% net income in year five.
  • Proprietary & Confidential © 2006 CentralScript, Inc.6 Business Model CentralScript offers pharmacies an innovative solution for increasing marketshare and services at lower incremental costs through interactive kiosks. CentralScript provides the kiosk hardware and software along with a pharmacy call center. The pharmacy call center provides outsourced front end services to the pharmacy that include data entry; claims adjudication; physician calls for formulary edits, drug utilization review (DUR) issues, and therapeutic interventions; and profile completion for new patients (i.e., allergies, address). One of the biggest differentiators for CentralScript is that it pushes claims adjudication to the initial discussion with the patient. No electronic prescribing or other process does that today. This saves the patient time. CentralScript works with retail, mail, and specialty pharmacies to locate these kiosks at employer sites, medical buildings, and other strategic locations. The pharmacies pay a monthly fee for the kiosks that are dedicated to them (i.e., private label) and a per prescription fee for the services that are provided. CentralScript operates as a centralized processing model which is widely utilized at mail order pharmacies to free up the dispensing pharmacists time and allow for robotics and other technologies to optimize the backend fulfillment. This model also allows the pharmacist to increase their ability to counsel patients and to focus on other health and wellness opportunities. As CentralScript expands into the sample dispensing and controlled over-the-counter (OTC) dispensing areas, CentralScript will generate revenue on a per transaction fee from manufacturers. Market Facts There are numerous facts and trends that support the development of the CentralScript business model including market growth, staffing shortages, and alternative pharmacy models. Size - The prescription drug market is enormous and growing every year. Current estimates put the market size at $221B, and it is projected to grow to $520B by 20141 . Over the next 3 years, retail pharmacy sales are projected to grow at least 20% based on the baby boomers, increased life expectancy, the new Medicare drug program, new drugs, and the rate of inflation2 Marketshare - According to the National Association of Chain Drug Stores (NACDS) . 3 , the pharmacy market share is divided as follows with Walgreens having 14%4 market share. 2004 Total Rx Sales 2004 Market Share Traditional Chain $90.66 B 41.00% Mass Merchants $21.55 B 9.70% Supermarket $26.97 B 12.20% Independents $40.50 B 18.30% Mail order $41.31 B 18.70% 1 “Walgreens: Drug Wars,” Boyle, Matthew, Fortune, June 13, 2005 2 As reported by Drug Week via NewsRx.com on May 28, 2006 3 NACDS - http://www.nacds.org/wmspage.cfm?parm1=507 4 “Walgreens: Drug Wars,” Boyle, Matthew, Fortune, June 13, 2005
  • Proprietary & Confidential © 2006 CentralScript, Inc.7 Cost Pressures - The economic situation for pharmacies is complicated by several forces putting pressure on them: • The growth of the Pharmacy Benefit Management (PBM) company has increased the concentration of insured lives within a few Fortune 100 companies forcing the pharmacies to accept lower reimbursement rates; • There are now more than 55,000 retail pharmacies in the US and an overcapacity of mail order pharmacies which is more than can be profitably supported; • The largest companies such as Walgreens are rapidly leveraging innovative technologies to allow them to fill drugs at a much lower cost while others are clinging to a high touch, convenience model that is not sustainable; and • A shortage of thousands of pharmacists in the US has driven starting salaries for pharmacists above $100,000 in some markets. Economics - Even with the ongoing push for lower reimbursement rates, the retailers continue to have good opportunities to make more money. NACDS estimates that the average retail prescription cost $63.59 in 2004 and that the retailers Costs of Goods Sold (COGS) was 79.9% of this price leaving them with $12.77 or 20.1% of the cost5 as gross margin. With the exception of a few companies, 50% or more of this is the cost to fill the prescription. Walgreens has the lowest fulfillment costs at $4.95 per prescription6 • The average insured member gets 13.1 Rxs per year, but only 50% of eligible members use their pharmacy benefit. that is helped by economies of scale and has been lowered with their rollout of a work sharing system called VISION. Studies have identified the mail order cost to fill as being as low as $2.50 for a 30- day prescription. Growth – The cost pressures facing pharmacies are mitigated by two things – inflation and utilization. Both continue to go up year over year and have dulled the effect of economic pressure. According to Express Scripts 2004 Drug Trend Report, Per Member Per Year (PMPY) utilization is 13.1 prescriptions for insured patients. Assuming a 6% annual growth in prescription utilization, that means that the average insured consumer would use 18.6 prescriptions PMPY by 2010. Value of a New Patient – The value of a new patient to a pharmacy can be significant. According to the following assumptions, the value can exceed $550 per year in incremental gross margin. • Therefore, a new utilizing patient represents 26.2 Rxs per year. • Assuming a household of 2.3, the remaining 1.3 members should fill on average 13.1 Rxs per year for a total of 17 additional Rxs. • These 43 Rxs represent $549 in incremental gross margin ((26 Rxs + 17 Rxs) * $12.77 per Rx). • Assuming that 25% of those visits include an average of $10 in incremental non- pharmacy sales with a gross margin of 35%, those 43 prescriptions represent an additional opportunity of $36 in incremental gross margin. 5 Facts and Resources section of the NACDS website (http://www.nacds.org/wmspage.cfm?parm1=507 accessed 11/13/05) 6 “Walgreens: Drug Wars,” Boyle, Matthew, Fortune, June 13, 2005
  • Proprietary & Confidential © 2006 CentralScript, Inc.8 Pharmacist Staffing - A recent article estimated that the current pharmacist shortage in the US of 4,000 to 8,000 open positions will increase to 157,000 by 2020.7 • An increasing number of employers are building on-site pharmacies; This staffing crunch combined with the payor’s move to consumer driven healthcare where the patient has greater responsibility for their healthcare dollars will put incredible stress on the system. Just as patients need the trusted pharmacist to play counselor or coach, the workload will have increased to the point where they will not have the time to spend with their patients. In 2005, these issues led Walgreens pharmacists to briefly strike noting the risk to patient safety. “The changing face of pharmacy will be increasingly evident in the next five-10 years with more women in the workforce, the potential for more part-time work by pharmacists, and the desire of pharmacists to spend more time on counseling and other patient services,” says David A. Mott, Ph.D., the study’s project director and associate professor and Hammel/Sanders Chair in Pharmacy Administration at the University of Wisconsin. [Regarding the National Pharmacist Workforce Study featured in the May/June 2006 Journal of the American Pharmacists Association.] New Pharmacy Models – With over 58,000 pharmacies in the US, there are lots of different models being tried to capture and retain marketshare. • Retail pharmacies are adding nurse practitioners offices through companies like MinuteClinic to their stores; • Kid specific pharmacies have opened in several major metropolitan areas; • Several companies are piloting “vending machine” type solutions for pick-up of dispensed medications; • In late 2005, the Department of Defense issued an RFI to explore a telepharmacy solution to replace their Military Treatment Facilities (MTFs)8 • Some states such as North Dakota are piloting a telepharmacy solution ; and 9 "Telepharmacy has worked well to bring pharmacy services to places that have not had a pharmacist, sometimes for years," said Howard Anderson, executive director of the North Dakota State Board of Pharmacy. "Even stores with full-time pharmacists are using telepharmacy to cover for one another. Telepharmacy is the most successful pharmacy regulation I have ever been involved with." which is a model allowed in several states where a pharmacy technician can dispense while being monitored remotely by a pharmacist. Iowa, Montana, Texas, Vermont, and Wisconsin also allow telepharmacy, according to ScriptPro, a pharmacy automation firm in Kansas. Alaska, Arizona, Idaho, Oregon, Utah, Virginia, and Washington have also addressed remote dispensing, said Carmen Catizone, executive director of the National Association of Boards of Pharmacy. "We are comfortable with telepharmacy with the proper safeguards," he said. "The discomfort comes when it is implemented not to extend services to remote locations, but to try to eliminate pharmacy jobs."10 7 “Pharmacist Shortage Worsens Nationwide”, November 8, 2005, Accessed on 11/13/05 from http://www.cbsnews.com/stories/2005/11/08/ap/national/printableD8DNV6BO6.shtml 8 http://www.fbo.gov/spg/USA/USAMRAA/DAMD17/W81XWH%2DTELEPHARM/SynopsisR.html 9 http://telepharmacy.ndsu.nodak.edu/ 10 Gebhart, Fred, “Telepharmacy spreading in the community setting”, Drug Topics, Nov 7, 2005
  • Proprietary & Confidential © 2006 CentralScript, Inc.9 Patient Satisfaction - Although studies show that pharmacy patients are generally satisfied, 56% of household consumers report that they use more than one pharmacy to fill prescriptions according to the WilsonRx Report 2005. And, according to NACDS, 68% of people choose a pharmacy based on location.11 Impatience – Based on a recent Associated Press / IPSOS survey12 • Grocery stores waits listed as worst place for Americans to wait; , it suggested that people hate to wait and companies should allow consumers to pre-order and come to pick up their goods. Some of the facts from the survey include: • Older people more impatient than younger; • People in country and suburbs can wait a few more minutes but that is it; and • 50% of those in the poll said they refuse to return to a business that made them wait too long and 20% owned up to speaking rudely to someone when they weren’t served efficiently. Loyalty - Even though location is a huge influencer, a Morgan Stanley report showed that the willingness to switch to mail was highest at big chains – Walgreens (44%), Wal-Mart (41%), and CVS (35%).13 Given the concentration of marketshare in these stores and their growth forecasts, it seems logical that the marketshare could be re-distributed to locations that are already visited like grocery stores. According to the Food Marketing Institute (FMI) shoppers make and average of 2.2 visits to the grocery store each week.14 Online Consultations – Health insurers are beginning to pay doctors for dealing with patients over the Internet. Aetna, BCBS of FL, and Cigna are three examples of companies doing this. Volume – The profitability of a pharmacy is closely tied to volume. An average Walgreens does over 250 prescriptions a day while the average grocery store does only 120 prescriptions per day. Consumer Driven Healthcare (CDHC) - CDHC is used to refer to a lot of different scenarios in which the burden for managing cost is pushed to the patient. This includes high deductible plans, Health Reimbursement Arrangements (HRAs), Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs). One of the biggest issues is that this is similar to the movement to 401K plans, but in healthcare, there is no decision support infrastructure. Initial estimates are that 40% of employers will offer this type of plan design over the next few years. This will put pressure on the pharmacist to act as this decision support resource. Aging of the Population – With the ongoing aging of the population and forecasted growth in people age 65+, this growth in prescription drug use will continue. Based on the Medical Expenditure Survey from 2002, the differences in utilization of prescriptions increases dramatically as people age. For example, people 35 to 44 use 7 prescriptions per year while those 45 to 54 use 12 prescriptions per year and those 65 to 74 use 24 prescriptions per year. 11 Merrill Lynch report “HY Drug Chain Retailers – 8 February 2005” pg. 18 12 Associated Press-Ipsos survey published on cnn.com on May 29, 2006, http://www.cnn.com/2006/HEALTH/05/29/impatient.nation.ap/index.html 13 Cross-Industry Insights: Mail Order Pharmacy – December 9, 2004, Morgan Stanley, pg. 15 14 American Shoppers Growing Increasingly Diverse in Shopping Preferences and Behaviors, Food Marketing Institute (FMI) Trends 2005, May 1, 2005
  • Proprietary & Confidential © 2006 CentralScript, Inc.10 RelayHealth has 13 insurance plans reimbursing them in Florida for this service. In a recent article, one doctor said he gets reimbursed $27 for each online consultation.15 Controlled OTCs – With The Combat Methamphetamine Epidemic Act of 2005, over-the-counter products such as Sudafed can only be sold from locked cabinets or behind the counter. Additionally, the law Self-Service – Numerous functions are being converted from face-to-face roles to self-service, automated roles. This began with ATMs as a solution for banking. It is now common for grocery stores to offer automated checkout, and airports to offer automated check-in using kiosks. Several BCBS plans have begun working with BenefitFocus to work with national employers to push self-service for enrollment and billing through an interactive kiosk solution. 16 • limits the monthly amount any individual could purchase : • requires individuals to present photo identification to purchase such medications • requires retailers to keep personal information about these customers for at least two years after the purchase of these medicines. Grocery – Grocery stores and the pharmacy in particular are being looked at as a source of information about health and wellness - “Besides serving as the cornerstone for consumer health and wellness programs, [pharmacies] have become integral in the marketing of health and beauty care products.”17 Yet, only 55% of the 9,771 grocery stores18 15 Wessel, Harry, “More insurers reimburse doctors for online care”, Orlando Sentinel, May 15, 2006, accessed online 16 http://www.fda.gov/cder/news/methamphetamine.htm 17 Food Marketing Institute (FMI) 2005 edition of Facts About Store Development 18 Number of grocery stores from NACDS 2005 numbers - http://www.nacds.org/wmspage.cfm?parm1=507 include pharmacies according to FMI 2005 Edition of Facts About Store Development. MTM - The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Public Law Number 108-173; MMA 2003) includes several provisions that will have a dramatic and lasting impact on the profession of pharmacy. One of the most notable changes is the addition of a prescription drug benefit under a new Medicare Part D that will be implemented in 2006. This legislation also provides several opportunities for pharmacists to expand the patient care services they provide and receive compensation for this care. One provision of the law that is likely to have a profound impact for the practice of pharmacy is the medication therapy management (MTM) services provision that applies to beneficiaries who enroll in Medicare Part D. This provision specifies services that prescription drug plans must establish to serve the needs of certain beneficiaries with chronic conditions. Furthermore, while other providers are not precluded from performing MTM services, pharmacists are the only health care professionals specified in the law as eligible to provide these services. Thus, MMA 2003 does not add MTM services to the list of covered services under Medicare Part B, although it does create a de facto “provider status” for pharmacists under Medicare Part D. (See Appendix C for more information on MTM.)
  • Proprietary & Confidential © 2006 CentralScript, Inc.11 "The challenge to providing MTM services is balancing a pharmacist's consulting practice with his other duties," says Ron Fitzwater, CEO of the Missouri Pharmacists Association. "It may be especially difficult for pharmacists in smaller retail settings to find the opportunity to meet with patients."19 Prescription Process with CentralScript The prescription process will always begin with a physician writing a prescription for a sick patient typically in a face-to-face setting. That prescription will someday move from paper to electronic, but certain steps remain constant. The prescription has to get to a pharmacy; the person has to talk, or have the option to talk, with the pharmacist for consultation; the prescription has to be adjudicated and any issues such as drug-drug interactions addressed; the prescription has to be filled; and the prescription has to be picked up or shipped. The CentralScript process would work as follows for new scripts. Refilling scripts could be done via phone/IVR, web, or kiosk. • Patient goes to the physician • Patient gets a prescription • If the physician faxes the prescription or sends it electronically to CentralScript o Prescription will be automatically entered into the system for pharmacist verification o CentralScript will call the patient to determine their preferred pickup location, resolve any open issues, and determine their means of payment • If the patient leaves with a physical prescription, they can either go to a kiosk or use their home PC if they have a video camera and a scanner o Patient writes name and date on prescription (to avoid fraud of same script being used at multiple kiosks) o Patient puts prescription on the scanner along with benefit card o Patient lifts up phone (for privacy of the conversation) o Pharmacy technician will answer the phone at CentralScript and view the fax as a digital image • Pharmacy technician will take patient’s information (if new) or ask them for ID# to know allergies and access other prescriptions processed by CentralScript (eventually this could be done via biometric scan) • As appropriate, a pharmacist or the pharmacy technician will counsel patient about savings opportunities (i.e., generic drugs or over-the-counter options or coupon offers from brand manufacturers) using pre-adjudication edits in the pharmacy system to identify opportunities • Pharmacist technician will identify patient’s participating pharmacy of choice • Pharmacist will verify prescription • Pharmacy technician will adjudicate script under the NABP (National Association of Boards of Pharmacy) for the participating pharmacy with the patient on the phone • Pharmacy technician will immediately know of any pharmacy system rejects based on plan design (e.g., step therapy, drug not covered, Prior Authorization required, drug-drug interactions) and be able to discuss options with the patient under the supervision and direction of a pharmacist • If prescription is clean (i.e., no physician follow-up required): o Patient will swipe credit card (or agree to use existing one on file) o Pick-up time will be given to patient o Patient goes back to work or other activities 19 LeClaire, Jennifer, Pharmacists Get Ready for Medication Therapy Management, Monster.com article accessed May 29, 2006, http://healthcare.monster.com/pharm/articles/mtm/
  • Proprietary & Confidential © 2006 CentralScript, Inc.12 • If physician needs to be called: o Patient goes back to work or other activities o Pharmacist will call physician to get new prescription o Patient will be called or e-mailed to let them know that a new prescription has been obtained and when it will be available • Patient picks up prescription at participating pharmacy or receives it in the mail from participating mail order pharmacy Table 1: Prescription Process at Kiosk Duane Reade Experience Duane Reade is a $1.4B retailer located in New York. They have more than 250 retail stores located primarily in the New York area. After filing for a patent (application # 20040204954) and testing a pharmacy kiosk for several years, Duane Reade has expanded their kiosks to over 80 locations. 50 of the 80 kiosks are located in Duane Reade stores to provide after hours support and shorter wait times at peak hours. They have had over 50,000 customers use the kiosks and are currently processing over 4,000 new prescriptions per week through the kiosks. The average time per transaction is two minutes and 86% of kiosk customers surveyed say they have a more favorable view of Duane Reade as a result of the kiosk and its improved customer service. They have also been placed at employers such as Citigroup and Time and hospitals and medical buildings to drive marketshare. Duane Reade has seen only a 25% cannibalization rate from these kiosks meaning that 75% of the users outside the stores are new customers. These new customers bring prescriptions along with foot traffic that is estimated to result in an average transaction of $2.50 per visit. Customer touches kiosk screen and is immediately connected to centralized pharmacy call center New Prescription Refill Question Scan prescription, Insurance card, and Patient profile Provide refill information Pharmacist answers questions about drug interactions, etc. Provide pharmacy options And select pharmacy Adjudicate claim w/I selected Pharmacy system Clean Rx is filled and either Mailed, delivered, or held for pickup Call physician to resolve reject Or shift utilization to lower cost agent Trigger request for additional Materials on condition Customer touches kiosk screen and is immediately connected to centralized pharmacy call center New Prescription Refill Question Scan prescription, Insurance card, and Patient profile Provide refill information Pharmacist answers questions about drug interactions, etc. Provide pharmacy options And select pharmacy Adjudicate claim w/I selected Pharmacy system Clean Rx is filled and either Mailed, delivered, or held for pickup Call physician to resolve reject Or shift utilization to lower cost agent Trigger request for additional Materials on condition
  • Proprietary & Confidential © 2006 CentralScript, Inc.13 Duane Reade collects $7 per day per kiosk in advertising revenue primarily from pharmaceutical manufacturers that buy banner ads on the kiosk. The opportunities for targeted marketing and cross- selling have not been explored by them yet. Duane Reade has a centralized call center that supports these kiosks and offers patients the ability to pick up the prescription within 15-20 minutes at any Duane Reade store. Duane Reade also leverages these kiosks to direct prescriptions to their central fill pharmacy which can then deliver or mail prescriptions to patient’s homes. Sheldon Jacobson, MD Chairman and Professor of Emergency Medicine, Mount Sinai “The kiosk is a welcome addition to the services available in the Emergency Department, especially when patient need to obtain important medication quickly. It also means that our physicians, nurses, and medical staff can spend less time on the phone with pharmacists and more time with patients. And it not only benefits our patients, but also provides a great convenience to Mount Sinai employees who have personal pharmacy needs to take care of.” As reported in Drug Store News in May 2006, DrugMax, a retail pharmacy chain licensing the kiosks from Duane Reade, expected each of the kiosks that they rolled out in medical buildings in Connecticut to generate about $150,000 to $250,000 in annual incremental sales. They plan to continue rolling out kiosks at a pace similar to the six they rolled out in the first quarter of 2006.20 Kiosk Evolution There are several kiosk strategies being tested in the pharmacy space today – in-office dispensing, generic samples, refills, and interactivity. There are also several kiosks being deployed in pharmacies and retail locations for other services – coupons, information, ordering. CentralScript intends to begin by using the Duane Reade interactive kiosk model and quickly morphing that into a blend of best practices that optimizes the real estate and return on investment for clients. By leveraging existing technology, CentralScript will be able to serve our customers, prove our business model, and do field research about how to best drive utilization of our kiosks. Additionally, initial estimates to reengineer and improve the Duane Reade kiosk configuration are $1,000,000 in application development and $3,500 per unit for production. Additionally, initial estimates to build a prototype of interactive dispensing kiosk are $500,000. Based on initial conversations, CentralScript believes that Duane Reade will be receptive to us leveraging their current kiosk to develop increased functionality for them. The CentralScript kiosk will focus on freeing up time at the pharmacy counter for patients to quickly access their medication and talk with a pharmacist. Our proposed, patent-pending21 • Module One – Leverage Duane Reade kiosk. kiosk has the following: a. Enhancement I – Rebuild Duane Reade type kiosk with bar code reader for refills, no code stored on the machine, two terminals – self-service vs. video, and increased touchscreen capabilities. 20 Alexander, Antoinette, “Distribution done: Focus on Rx”, Drug Store News, May 1, 2006, pg. 88 21 United States Provisional Patent Application Ser No.: 60/804,897 filed June 15, 2006.
  • Proprietary & Confidential © 2006 CentralScript, Inc.14 b. Enhancement II – Integrate coupons and cross-sell into the kiosk (e.g., Matthias MoneyBoard – www.matthiasmoneyboard.com or Catalina Marketing’s HealthResources subsidiary). • Module Two – Add dispensing technology for over-the-counter products required to be stored behind the pharmacy counter (e.g., Sudafed). • Module Three – Add dispensing technology for samples and/or prepackaged medications. Table 2: Kiosk Modules – Customer, Pain Point, Value Module One: Interactive Kiosk w/ Health Information Portal Module Two: “Controlled” OTC Dispenser Module Three: Dispensing Customer PBM, MCO, Pharmacy Pharmacy Physician Pain Points Patient has to make multiple trips, shortage of pharmacists, benefit of centralization of front- end services Certain products (e.g., Sudafed) are required to be stored behind the counter distracting pharmacist from other responsibilities, tracking system is site specific Samples - MDs don’t comply with PDMA (sample storage and tracking), high cost of sample distribution, no integration / tracking of samples by patient for DUR, no integration of samples with benefit Prepackaged drugs – in- office dispensing has not taken off due to complexities Value Time saver for patient, lower cost per incremental Rx to pharmacy, after-hours support, increased marketshare due to convenience Frees up pharmacy time without sacrificing control, centralized and automated tracking, and better regulatory compliance Samples - Mets PDMA guidelines, allows for integration with benefit, clinically more appropriate Prepackaged drugs – easy for patient, more compliance likely, possible revenue source for MD The goal is to close the gap between what pharmacists are being trained to do in school (i.e., counseling patients) and the realities of the market (i.e., production focused). In doing this, the pharmacy can become the hub for health and wellness and CentralScript can become a value-added partner in this transition. “The pharmacist of tomorrow must look beyond the prescription counter and consider how the food products that are available in the entire store should be considered in the development of dietary advice for their clientele” Carl Keen, PhD, distinguished professor of nutrition and internal medicine at the University of California, Davis Drug Store News, May 1, 2006, pg. 109
  • Proprietary & Confidential © 2006 CentralScript, Inc.15 ‘“Different occasions are driving people to shop supermarket pharmacy, and it’s not all about medicine.” The real opportunity for supermarket pharmacy retailers lies in “more of a progressive approach in terms of health and wellness.”’ Harvey Hartman, founder and chief executive of The Hartman Group at the Food Marketing Institute Pharmacy Conference Drug Store News, May 1, 2006, pg. 109 Marketing Plan – Product, Place, Promotion, and Price Product – CentralScript provides a technology enabled service which uses the interactive kiosk to provide easy access to a shared service call center. The call center is open 24x7 and is a licensed pharmacy. It is staffed by pharmacy technicians and pharmacists. It provides multi-lingual support and over time may provide access to other healthcare professionals to provide a robust tele-health experience to the patient. For each constituent, this offers a slightly different value proposition: • Retail pharmacy – Expands their hours without expanding their staff. Allows them to leverage other services (e.g., multi-lingual) without investing. Allows them to extend their presence into employer sites and drive a centralized strategy. Maintains foot traffic versus losing it to mail order. Prevents them from needing to hire more staff as utilization grows. Eventually allows them to close low volume pharmacy locations but continue to offer service through kiosk. In states where telepharmacy, dispensing drugs without a pharmacist on-site, is allowed, provides the virtual pharmacist support needed. • Pharmacy Benefit Managers (PBMs) and Managed Care Organizations (MCOs) – Provides them with a tool to use with large employers to help increase their threshold for aggressive trend management programs and offers a “drug coach” to their employees with an opportunity to better support trend management programs by pushing the adjudication process up to the time of interaction with the patient. • Patients – Reduces their errands by locating the kiosk at a place where they already have to be. Expands their access to a pharmacist for counseling and advice on saving money. Expanded hours compared to most pharmacies. • Retailer without a pharmacy – Increased service offering for their current customers. Increased revenue by keeping customers in their stores. • Employers – Increased service offering for their employees. Less real estate and complications than on-site pharmacy. Better trend management by having the time to actively intervene and shift utilization to lower cost alternatives. Decision support for their employees as they shift the burden of cost management to them. • Retirement Communities (not nursing homes) – Increased convenience. Access to personal pharmacist. Ability to offer geriatric focused advice. Placement – The kiosk can be placed in many locations, but CentralScript will begin by targeting the following: 1. Grocery chains with pharmacies that would like to expand their hours and services, extend their community presence, and grow marketshare; 2. Regional pharmacy chains that are fighting national chains for marketshare; 3. Hospitals which don’t have an outpatient pharmacy on-site or have limited outpatient pharmacy hours compared to their hours of operation; 4. Physician’s offices or medical buildings with more than 5 physicians and without an outpatient pharmacy on-site (e.g., urgent care locations); 5. Corporate campuses or office buildings with over 1,000 employees; and
  • Proprietary & Confidential © 2006 CentralScript, Inc.16 6. Retirement communities with over 100 people (not nursing homes that often have a dedicated pharmacy service today). Promotion – Building consumer awareness and trust with the brand will be essential. CentralScript intends to begin market research pre-launch and establish an ongoing feedback mechanism to continuously enhance the positioning and communications. In order to leverage this information, CentralScript intends to focus on several tactics: • Greeters – Each kiosk location will be staffed by a greeter for the initial 3-months after it is deployed. That person will be responsible for engaging possible customers, helping them use the kiosk, answering questions, and building relationships with the permanent staff so that utilization will continue after the launch period. • Incentives – To attract initial users, CentralScript will offer a $5 gift card to local stores in order to drive initial adoption (funded by the pharmacies). • Samples – CentralScript intends to work with sample card vendors to drive volume from physician’s offices to the kiosk as part of the redemption process for the cards. • Co-marketing – To build initial trust, CentralScript will prominently display the logos of their participating pharmacies. • Targeted Marketing – Depending on the setting, CentralScript will pursue targeted marketing programs to drive awareness and utilization.  At employers, CentralScript will work with the HR department and PBM / MCO to develop co-branded materials to build awareness and leverage intranet sites along with key events such as open enrollment.  At pharmacies, CentralScript will buy address lists for the surrounding zipcodes and do a targeted mail and automated call campaign to encourage utilization. CentralScript will also take advantage of existing customer lists and advertising venues (e.g., Catalina, newspapers) with the participating pharmacy.  At medical buildings, CentralScript will focus on the physician’s staff and physicians similar to pharmaceutical representatives. By getting their buy-in to the concept, patients will be more willing to use it. • Affinity Programs – CentralScript will focus on maximizing the share of wallet for patients and encouraging viral marketing to capture referral business and build stickiness. • Public Relations – Given the uniqueness of the solution and the fact that prescription stories are front-page business, CentralScript will work aggressively with the local press to get stores placed about the company and the kiosks. • Showcase Sites – CentralScript intends to identify 2-3 “showcase” locations that will attract a lot of traffic but may not capture a lot of prescriptions. In St. Louis, two sites being considered are Lambert Airport and Chesterfield Mall. Both of them would allow people to see the kiosk and talk with the greeter, but they are not locations where they would typically think of bringing their prescriptions. • References – Given the success that Duane Reade has had in New York, CentralScript intends to leverage their employer and physician sponsors to open doors in target markets. Pricing – CentralScript pricing strategy is as follows: • $1,500 per month per kiosk rental fee as part of a 2 year contract which would cover the HW, SW, connectivity, monitoring, and the basic call center support; o This is less than the staffing costs for a pharmacy to be open one additional hour Monday through Friday. • A variable fee per Rx based on type of drug, days supply, and refill or new: o $5 per new 30-day brand Rx; $8 per new 30-day generic Rx o $10 per new 90-day brand Rx; $16 per new 90-day generic Rx
  • Proprietary & Confidential © 2006 CentralScript, Inc.17 o $2 per refill processed through the kiosk o The variable pricing for brand and generic aligns incentives based on where money is made in pharmacy (i.e., generic drugs). $5 is below the cost to fill for all pharmacies except Walgreens. Pricing for other revenue streams (e.g., advertising) will be negotiated on a one-by-one basis. Using this pricing model and some basic assumptions, CentralScript has created the following Return on Investment (ROI) model for a retail pharmacy. Table 3: Pharmacy ROI Base Aggressive New Rxs / week 25 100 Cannibalization Rate 25% 25% Incremental Revenue ($60 / Rx) 58,500$ 234,000$ Refill Revenue (40% for 9 months) 187,200$ 748,800$ Pharmacy GM (19%) 46,683$ 186,732$ Incremental Front End GM ($2.50 / Rx @ 35% GM) 3,071$ 12,285$ Rental Costs ($1,500/mo) (18,000)$ (18,000)$ Transaction Costs ($6.50/Rx) (8,450)$ (33,800)$ Pharmacy Net Benefit 23,304$ 147,217$ Pharmacy ROI 88% 284% Assumptions: * Base volume is below Duane Reade (50/week average) and DrugMax ($150-$250K in incremental revenue) expectations. * Cannibalization rate, revenue per Rx, GM%, and front end sales are based on Duane Reade experience * For refill rate, assumed 40% maintenance drugs with average compliance of 9 months.
  • Proprietary & Confidential © 2006 CentralScript, Inc.18 Technology There are three key technology aspects – kiosk, pharmacy system integration, and call center. With the exception of the current kiosk technology, the other two are still under development. 1. Kiosk – The current Duane Reade kiosk is developed and manufactured by outside vendors including Creative Kiosk (www.creativekiosk.com). The kiosk uses Dell components which include some code stored locally. CentralScript would likely look at using the kiosks as terminals and centralizing the software code with a Citrix server. Finally, the kiosk then uses an ATM over DSL network from New Edge Networks (www.newedgenetworks.com) to provide the connectivity to support the kiosk application and video conferencing. The next generation kiosk will include additional kiosk hardware, more robotics, the centralization of management for diagnostics and maintenance, and other upgrades. It will likely be developed in partnership with a kiosk development firm for software and jointly with a contract manufacturer. 2. Pharmacy system integration – There are three pharmacy systems that represent the majority of implementations – Per-Se Technologies (formerly NDC Health), PDX, and QS/1. Based on initial discussions with Per-Se, it appears easy to either access their application through a browser based front-end or build out an integration layer that would allow the centralized call center agents to mimic any participating pharmacy on the Per-Se system. PDX does not have a web based version or any plans of moving to a web based version. QS/1’s latest release is web based. Since there are also some custom solutions used by large chains and mail order pharmacies, CentralScript anticipates some system integration or use of XML or other standards to communicate between applications. Additionally, for mail order pharmacies or pharmacies using automation solutions like ScriptPro, CentralScript intends to be able to send the adjudicated claim directly to the system for fulfillment. 3. Call center – There are numerous standard solutions for call center that address IVR, inbound queues, data integration, call recording, and other operation elements. Duane Reade also provides a “receptor site” which is a PC with video conferencing technology and image capture for working with the kiosks. CentralScript intends to build upon the receptor site to incorporate additional call center functionality. Ultimately, each call center agent will have a desktop solution which includes two monitors – one for image capture and video conferencing with the kiosk and one for pharmacy system access. As the CentralScript service model expands, other technologies for data mining, reporting, and supporting pharmacy web functionality will become more important, but many of those solutions are available off the shelf today. Pilot Strategy Although the technology is proven, it is important to demonstrate the value proposition outside of New York; show that CentralScript can serve multiple pharmacies; and capture real patient experiences to design the next generation kiosk. (Both DrugMax and Duane Reade use the technology in a one-to-one strategy and have limited detailed data on patient use patterns and demographics.) Beginning with several clients, CentralScript intends to conduct a pilot to evaluate the following:
  • Proprietary & Confidential © 2006 CentralScript, Inc.19 • Profile of user (gender, age, number of Rxs, time of day) • Number of new pharmacy customers • Ability to decrease multi-pharmacy utilization • Additional cross-sell (i.e., did they buy other goods at store or accept other promotional offers from CentralScript) • Impact on patient satisfaction • Ability to change patient behavior (e.g., increase generic utilization) • Staffing ratios needed • Other functionality desired Since there are different possible implementation scenarios, CentralScript is looking to address as many of the following during the pilot period with a retail pharmacy and is looking for a second pilot opportunity with a payor or PBM: • Employer kiosk private labeled for specific retail pharmacy chain • Employer kiosk funded by PBM or MCO to direct care to preferred pharmacies including mail order • Retail kiosk at busy store to alleviate time spent in line • Retail kiosk at average to low volume store to evaluate ability to limit pharmacy hours • Medical facility (group physician practice or hospital) kiosk This pilot period, including an initial 3 month start-up period, will give the team time to work together, and the entire pilot will help identify operational challenges as well as provide time for the IS team time to build out different integration options for the pharmacy systems. CentralScript will also be leveraging the experience and development company which Biju Kulathakal brings to the table. Biju recently developed GetAMovie, the DVD kiosk which was purchased and rolled out by McDonalds. CentralScript intends to use temporary call center space during this time with a core management team and consultants until the pilot is completed. Upon completion, CentralScript will use the validated model to finalize staffing, marketing materials, branding, pricing, and determine an operational plan for how to scale. Growth Plan St. Louis offers many dynamics which are optimal for a good pilot site - good base of pharmacists and pharmacy technicians, a strong second tier of pharmacies (i.e., Schnucks, Dierbergs, Shop-n- Save, Target), centralized corporate campuses (i.e., AG Edwards, EdwardJones, Emerson, Enterprise, Anheuser-Busch, Monsanto), and a disperse population. But, CentralScript is also looking at California, Connecticut, Delaware, Illinois, Maryland, Minnesota, New York, Virginia, and Wisconsin which are states where the Boards of Pharmacy have already evaluated kiosk technology.22 Additionally, CentralScript believes that the states that have approved telepharmacy (the dispensing of a prescription without a pharmacist physically present) or those that have addressed remote dispensing are good potential targets. Those states include Alaska, Arizona, Idaho, Iowa, Montana, North Dakota, Oregon, Texas, Utah, Vermont, Virginia, Washington, Wisconsin, and Wyoming.23 22 Sinkoff, Martin, “Will ATMs replace you?”, Drug Topics, October 10, 2005 23 Gebhart, Fred, “Telepharmacy spreading in the community setting”, Drug Topics, Nov 7, 2005
  • Proprietary & Confidential © 2006 CentralScript, Inc.20 The initial targets from a pharmacy perspective are the regional chains, the supermarkets, and the mass merchants which together represent over 13,000 locations. Additional growth will come from the additional kiosk functionality which will expand CentralScript’s customer base to include the pharmaceutical manufacturers and the OTC product teams. Pipeline CentralScript has talked with several large grocery chains, pharmacies, and pharmacy benefit management companies along with individuals responsible for medical facilities. The feedback has been that the challenges identified and the self-service strategy to address them are on target. The table below gives a quick status on several of these conversations. It is anticipated that most of them will move more quickly once they understand that CentralScript will be a viable solution and can tangibly see our proposed operations. Organization Status Large national Pharmacy Benefit Manager (PBM) Agreed in concept to how to work together. Have done joint presentation to large employer coalition. The coalition is scheduling a “demo day” for their clients. Retail friendly Pharmacy Benefit Administrator (PBA) Liked the idea. Formed cross-functional group to evaluate. Have upcoming ½ day white board session. International pharmacy company Talking about creative solutions for how to leverage kiosks within their model. National Managed Care Company Put CentralScript into proposal for employer business. Received positive employer response. National Wholesaler Have had initial discussions about business opportunities. They have requested whiteboard session at corporate headquarters to discuss. The primary pharmacy targets are listed in Appendix D. St. Louis Deployment Example In a market such as St. Louis, CentralScript would focus on deploying 60-100 kiosks targeting the following: • Grocery Chains and Mass Merchants o Work with local and national grocery stores to locate kiosks at their stores o Work with national companies such as Target and WalMart to locate kiosks at their stores • Corporate o Work with local pharmacy consultants at Hewitt, Towers Perrin, and other companies and the St. Louis Area Business Coalition on Health o Locate kiosks on large corporate campuses such as Anheuser-Busch, AG Edwards, Monsanto, Edward Jones, Enterprise, MasterCard, Sigma-Aldrich, Citigroup, Emerson Electric, and Maritz. o Locate kiosks in downtown St. Louis and Clayton office buildings (e.g., One Metropolitan Square). • Physicians
  • Proprietary & Confidential © 2006 CentralScript, Inc.21 o Work with medical groups such as St. John’s Mercy to locate kiosks at their medical office buildings throughout town o Identify the top 10 physician practices and to locate kiosks in their offices o Approach BJC, SSM, and Ascension about locating kiosks at their hospitals and clinics where they do not have an outpatient pharmacy • Retirement Communities Channel Sales CentralScript believes that there is a significant opportunity to work with large existing companies in a channel sales strategy. For example: • Work with PBMs and MCOs to get introduced to national employers • Work with one of the drug wholesalers to get introduced to pharmacies • Work with one of the drug wholesalers to build out integration and drive utilization of their central fill • Work with companies that provide hospital services to get introduced to hospitals • Work with companies that provide services to brand pharmaceutical manufactures to get introduced to brand managers for marketing opportunities • Work with one of the telepharmacy hardware companies to become their preferred support service Direct Sales A key part of CentralScript’s direct sales strategy is involvement with the local and national associations. CentralScript intends to join the Food Marketing Institute (FMI), the Grocery Manufacturers Association (GMA), National Association of Chain Drug Stores (NACDS), and National Council of Prescription Drug Plans (NCPDP) and have an active presence at their conferences. Additionally, by leveraging our Board of Advisors and key consultants, we believe we can open a lot of doors and engage the right people at many of the chains. Pharmacy is a very small industry and success in one market will quickly translate to success in another market. After our initial clients are signed, we will be able to dedicate a full time person to sales. Partnerships CentralScript believes there are numerous opportunities to partner with existing companies to create new models or mutually beneficial solutions. For example: • The Urgent Care Association that is trying to counter the nurse practitioner clinic model. • Nurse practitioner clinics that want to be open outside of pharmacy hours or are located outside of a pharmacy. • Disease management companies to enroll participants. • Healthcare content companies trying to reach patients at the time of the event. • Manufacturers looking to provide content. • Sampling companies trying to provide timely access to sample cards or samples. Competition Today, there is no direct competition for this model, but this will change. Currently, there are several different pilots being tried and both start-up companies and established companies looking at how to address the pharmacist shortage. Potential competitors include:
  • Proprietary & Confidential © 2006 CentralScript, Inc.22 • Duane Reade owns the kiosk that CentralScript will be licensing and has implemented this model, but they are a pharmacy chain that only serves NY and NJ. No other retailers are receiving prescriptions from the Duane Reade kiosks, but this could change. By working with Duane Reade, we should eliminate them as competition. • One other retailer, DrugMax, has licensed the Duane Reade technology. They appear to have an aggressive plan for growth in several areas including on-site pharmacies. By working with Duane Reade, we should eliminate them as competition. • Walgreens has begun to explore several options including mini-Walgreens as on-site pharmacies and already have a centralized call center. These are not currently positioned as services for other retailers. • Asteres has started piloting ScriptCenter which is a 1300 lb refill distribution kiosk which allows patients to enter a PIN and pick up their refill. This is being tried in CA and VA. Distributed Delivery Networks (DDN) is trying a very similar refill kiosk model. These models do not seem to offer much interactivity or actually save the pharmacy time. • CHD Meridian, an onsite medical and pharmacy company, recently partnered with Allscripts, a physician dispensing company, to offer a combined onsite medical clinic with a mini- pharmacy. • Cardinal Health and the other distributors have created niche service companies (e.g., 24x7 pharmacy contact center for hospitals) but have not expanded their footprint. • Instymeds is a smart kiosk with the ability to dispense prescriptions, but it is dependent upon changing physician behavior to have them send an electronic prescription directly to the device that is located in their lobby. They don’t address the subsequent fill for the patient. • MedVantx offers physicians a sample kiosk for generic drugs that helps start patients on generics. It sells the value to the managed care companies and gets them to pay for the sample. • ScriptPro, Parata, and other pharmacy technology companies continue to look for hardware solutions in the pharmacy space. They have the knowledge and connections to create a competing technology. If they follow the path of IBM and other companies that grew their services model, they could present a competitive threat. “These technologies may all merge at one point, say technology experts. It is all part of what they believe is an inevitable shift in service. The fact that self-service is encroaching into pharmacy should shock no one, these experts say: ‘It is not surprising that traditional retail point-of-sale has evolved beyond checkout,’ said Paula Rosenblum, director of retail research at the Aberdeen Group in Boston, in a report titled, ‘The Empowered Point of Service.’ ‘Adding self-service touch points throughout the store can help hold the line on payroll while improving customer convenience,’ she noted.”24 24 Sipkoff, Martin, “Will ATMs replace you?”, Drug Topics, October 10, 2005 Additionally, electronic prescribing, if it were to take off, or other tele-health companies could present threats to the growth of CentralScript depending on timing, scope, and their adoption. Without the integration of RxHub, the PBM solution for eligibility and benefit information, and SureScripts, the retail pharmacy solution for electronic transfer, it is unlikely that adoption will happen rapidly and provide true value. Based on initial conversations with several physician groups, it would appear that CentralScript could serve as the central point for the electronic transmission and then subsequently allow the patient to access the process through the kiosk, select the pharmacy, and discuss any clinical or benefit edits at that time.
  • Proprietary & Confidential © 2006 CentralScript, Inc.23 The primary risk for new competition is from the three large national prescription drug wholesalers – Cardinal, Amerisource Bergen, and McKesson. The wholesalers are in a strong position to build and implement a solution given their existing distribution skills, retail relationships, and hardware and software products (e.g., McKesson’s recent deal with Parata). Another risk for competition is from a large national chain drugstore such as Walgreens. Walgreens has stated their growth expectations and anything that could keep them from growing would be viewed very aggressively. Alternatively, they could view a solution like this as a way to enter into new markets and to secure increasing marketshare in key markets. The large national Pharmacy Benefit Managers (PBMs) would not likely go after this market as competitors since their sweet spot from a margin perspective is mail order. This could cannibalize their mail volume and only further empower the retail community. Additionally, this solution needs to be something for all patients and something that includes all pharmacies that choose to participate. PBMs cannot do either of these, and many pharmacies do not trust them. Barriers to Entry Initially, expanding the relationship with Duane Reade and leveraging their prior investment in the space may provide a barrier to entry. But, ultimately, the rapid prototyping and modifying of the Duane Reade solution to create a next generation kiosk with patent pending technology and sophisticated applications will provide substantial differentiation. Additionally, CentralScript’s ability to acquire knowledge and human assets associated with the kiosk and patient’s experience with the kiosk will provide protection to new entrants. Since CentralScript’s model and strategy for using the kiosks actually complements the pharmacy profession, it is expected to garner their support compared to many other automated solutions that appear poised to try and replace the pharmacist. The final barrier will remain real estate. Employers and others will not want to have multiple pharmacy related kiosks nor will they want to continue changing solutions. By moving fast and early, CentralScript can secure key locations for supplying pharmacy services and eventually more health and wellness services. Exit Strategy There are numerous exit strategies for CentralScript. Selling the company in 4 to 5 years to an existing enterprise seems to present the best opportunity versus trying to take the company public. The most likely acquisition companies would include: • Drug wholesaler • Managed Care Company or Pharmacy Benefit Manager • Technology company (e.g., RxHub, EDS) • Retail pharmacy
  • Proprietary & Confidential © 2006 CentralScript, Inc.24 Financials The key in scaling this business is the per unit economics. The table below represents the opportunity per kiosk with the following assumptions. The table shows a conservative, expected and aggressive scenario of contribution margin per kiosk. This contribution margin per kiosk would cover Sales, General, and Administrative (SG&A) costs. Over time, as additional features are added and the kiosk value is proven, the profitability per kiosk should increase. • For example, using data from Allscripts 2005 Annual Report on their prepackaged medication business, their net income is 13% on $45,609,000 in revenues. • As another example, Catalina Marketing’s Health Resources division which provides targeted marketing for retail pharmacies saw an 18% net income on $89.5M in revenue for their fiscal year ending 3/31/06. The conservative model stresses the importance of strategically picking sites, owning the intellectual property, and leveraging other sources of revenue (e.g., advertising). A low volume kiosk where a premium is being paid for the kiosk could lose money. Table 4: Per Unit Economics Conservative Expected Aggressive Number of Rxs 200 300 400 Revenue Rental -$ 1,500$ 1,500$ Transaction Fees 1,300$ 1,950$ 2,600$ Advertising 210$ Direct Costs Leasing (465)$ (465)$ (465)$ Operational (350)$ (350)$ (349)$ Licensing (150)$ (150)$ (150)$ Staffing (1,017)$ (1,017)$ (1,017)$ Real Estate (100)$ (100)$ (100)$ Operating Profit (782)$ 1,368$ 2,229$ Annualized (9,383)$ 16,417$ 26,749$ Breakeven without a monthly rental fee is 320 Rxs / month Assumptions: * $6.50 per Rx in transaction fees - Duane Reade gets as high at 600 Rxs/mo/kiosk * $12,500 per kiosk if licensing; $7000 if own IP; plus $2500 per receptor site (1 per 5 kiosks) * 36 month lease at 10% APR * $300/mo savings if own IP (leasing plus licensing charge) * Staffing - 1 tech per 8 kiosks ($30K salary) + 1 RPh per 5 tech ($100K salary) for 2.5 shifts w/ 22% benefits * Assumed a monthly cost to the location of $100 * Operational costs are for kiosk monitoring, service, and DSL connection * Licensing is a monthly charge from Duane Reade
  • Proprietary & Confidential © 2006 CentralScript, Inc.25 After conclusion of the pilot, CentralScript intends to rapidly scale the business nationally and begin to build out additional functionality. CentralScript believes a purchase price of 2x revenues would be reasonable and that an exit could create significant returns for the investors. The model below shows an aggregate view of the forecasts. Table 5: 5-year Proforma Year One Year Two Year Three Year Four Year Five Number of Kiosks 13 229 709 1,200 1,800 Total FTEs 15 108 280 453 664 Revenue Kiosk Rental 42,000$ 1,630,125$ 7,278,154$ 18,753,552$ 29,536,812$ Per New Rx 96,200$ 2,671,988$ 12,043,600$ 31,603,163$ 50,249,028$ Advertising 16,800$ 434,700$ 1,940,841$ 5,000,940$ 7,876,481$ Total Revenue 155,000$ 4,736,813$ 21,262,595$ 55,357,655$ 87,662,321$ Operating Expenses (468,663)$ (4,215,739)$ (15,400,876)$ (36,029,520)$ (53,990,645)$ Sales & Marketing Expenses (269,400)$ (3,068,650)$ (1,224,800)$ (1,656,040)$ (2,164,986)$ General & Administrative Expenses (1,316,405)$ (4,872,453)$ (3,357,663)$ (4,362,176)$ (4,792,641)$ Total Expenses (2,054,467)$ (12,156,842)$ (19,983,339)$ (42,047,736)$ (60,948,272)$ EBITDA (1,899,467)$ (7,420,029)$ 1,279,255$ 13,309,919$ 26,714,049$ Depreciation/ Amortization (46,785)$ (547,996)$ (1,926,933)$ (3,636,194)$ (5,433,795)$ Taxes -$ -$ -$ -$ (8,164,809)$ Net Income (1,946,252)$ (7,968,026)$ (647,677)$ 9,673,725$ 13,115,444$ Angel - pilot / ramp-up 1,500,000$ Series A - buy IP / scale-up (month 9) 12,000,000$ Series B - rapid growth (month 22) 10,000,000$ Terminal Value - 2x Revenues (year 5) 175,324,642$ (Note: This model is a forecast based on numerous assumptions. If any material assumptions prove incorrect, the projected results may vary dramatically. Additionally, this model does not fully reflect all opportunities for capital leasing nor does it represent future revenue and profit opportunities which may exist.) Additional monthly and annual detail to support this proforma can be found in Appendix H.
  • Proprietary & Confidential © 2006 CentralScript, Inc.26 Management Team The management team is continuing to grow but is built around George Van Antwerp who recently left Express Scripts to found this company. The current team members along with some of the potential team members are included below. More details on each individual are available in Appendix A. • George Van Antwerp is the CEO and founder. Mr. Van Antwerp has significant experience working for Express Scripts, a $16B Pharmacy Benefit Management company. He has worked in the areas of prescription distribution, electronic prescribing, generic sampling, and trend management. When he left Express Scripts, Mr. Van Antwerp was responsible for a direct marketing program that moved $300M in drug spend from retail pharmacies to mail order pharmacies in 2005. Additionally, he has worked for Firepond, a Customer Relationship Management (CRM) software company, and as a consulting manager with Ernst & Young LLP. • Larry Pyles is the CIO and brings a wealth of experience including CIO at Thrifty Drugs, CIO of Edison Brothers Stores, COO of a managed care company, VP of IS for Spiegel and owner of a service organization. • Biju Kulathakal is working part-time as the CTO. Mr. Kulathakal was a founder and President of Enterprise Logic Systems, a software development firm that specializes in the financial services and trading industry. Enterprise Logic Systems is a provider of software consulting services to some of the largest banks and investment houses on Wall Street. Mr. Kulathakal specializes in quantitative analysis and system design for trading. Mr. Kulathakal was also a partner at GetAMovie, Inc which was sold to McDonalds and subsequently re- branded as RedBox (a DVD kiosk). • Our Vice-President of Pharmacy and Pharmacist-in-Charge is a pharmacist with an MBA that has hospital pharmacy and community pharmacy experience and currently works at a group purchasing organization. The company is searching for two strategic hires – a Chief Operating Officer (COO) with call center experience and a pharmacist with sales and marketing experience. Initially, consultants have and will be used as needed to fill these gaps. The management team has all signed two-year employment agreements of which a template is provided in Appendix G. Actual copies of specific agreements can be provided upon request.
  • Proprietary & Confidential © 2006 CentralScript, Inc.27 Advisors and Directors CentralScript has a Board of Advisors comprised of the following five people (see Appendix B for more details). Each of the advisors has been granted 2,500 shares as thanks for their time during the start-up phase. As appropriate, formal relationships to leverage their experience and connections may be developed as part of our final operating structure. • Dr. Tom Patton who is the President of the St. Louis College of Pharmacy. • Gary Levine, RPh who is the Vice-President of Marketing and Business Development for Mercy Health Plans and was previously with Catalina Health Resources and Medicine Shoppe. • Earl Hurst who is the VP of Sales for RxAmerica, a PBM owned by Longs Drugs and was previously with MedVantx and several other start-ups after working at ValueRx. • David Azad who is a Principal at Galen Partners which is a healthcare private equity fund in New York. • Callaway Ludington Zuccarello who is President of Callaway & Company, a marketing strategy firm. The company anticipates that it will form a five person Board of Directors subsequent to the completion of the initial composed of internal and external Directors. Two external individuals with significant healthcare and start-up experience have been identified. Use of Proceeds The net proceeds of this offering will be used to hire our management team, build out our operations and staff, lease and deploy kiosks, begin marketing and market research, fund kiosk development and build out of a prototype, and provide working capital. We believe that the net proceeds will be sufficient to fund our operations for approximately 8 months in the case of the minimum offering. The costs below assume no revenue offset which reflects the potential that we may put our typical fees at risk during the pilot.
  • Proprietary & Confidential © 2006 CentralScript, Inc.28 Staffing Pharmacy staff and mgmt 224,583$ Greeters 37,500$ Mgmt salaries (CEO, COO, CIO) 250,000$ Tech support @ $40K plus benefits 23,333$ Admin in month 7 @ $35K plus benefits 13,333$ Benefits (22% of salary) 120,725$ Capital Expenditures 5 kiosks at $12,500 62,500$ 2 receptor sites at $2,500 5,000$ PCs, server, telcom, software, furniture 113,007$ Other Monthly service / maintenance / licensing fees ($500/kiosk) 29,000$ Marketing (design and implementation) 130,000$ Legal 62,500$ Kiosk prototype development 500,000$ Misc (office space, insurance, supplies, travel) 130,798$ Total Estimated Expenses (12-months) 1,702,280$ Average Monthly Burn Rate 141,857$ * Capital expenditures are shown at full cost although we are likely to work with a capital leasing company to better manage our cash flow.
  • Proprietary & Confidential © 2006 CentralScript, Inc.29 Start-Up Plan Once funding has been secured, the management team has developed a 100-day plan to begin operations. This plan is laid out below. Deliverable Owner Wk1 Wk2 Wk3 Wk4 Wk5 Wk6 Wk7 Wk8 Wk9 Wk10 Wk11 Wk12 Wk13 Wk14 Wk15 Secure real estate and get furniture GVA Contract w/ virtual call center CON Apply for pharmacy license CR Secure capital leasing agreement GVA Buy PCs / Servers / Printers LP Buy phones CON Buy kiosks / receptor sites LP Secure access and training materials for pharmacy software LP Create branding and sales materials GVA Update website GVA Determine CRM strategy CON Determine pilot measurement All Contract for telecom CON Network plan LP Place recruitment ads CR Hire pharmacists and technicians CR Hire greeters CR Apply for provisional patents GVA, BK Develp training program CR, CON Develop P&Ps and SOPs CR Finalize payroll outsourcing CON Finalize controller relationship GVA Hire receptionist (virtual or real) GVA Develop standard agreement for kiosk location and customers LP Finalize benefits (health, etc.) CON Get insurance (WC, pharmacy, business) GVA Finalize Duane Reade agreement GVA Get all necessary business licenses, permits LP Identify advertising opportunities GVA Finalize customer contracts GVA Determine service levels LP Determine company culture GVA Build out demo site LP Meet w/ pharmacy software vendors LP, CR Prepare for conference presentations GVA
  • Proprietary & Confidential © 2006 CentralScript, Inc.30 By getting off the ground quickly, the team would hope to get involved in several upcoming national events such as the NACDS Pharmacy and Technology Conference (http://meetings.nacds.org/rxconference/2006/registration.cfm) which is in August, but it would cost approximately $7,500 to advertise and attend with a small booth plus travel. Additionally, an ideal time to rollout kiosks to employers is as part of their annual open enrollment for benefits which happens in the fall. Key Milestones The upcoming milestones that the team is focused on achieving are: 1. Build demo July 31, 2006 2. Finalize funding August 30, 2006 3. Begin operations October 30, 2006 4. First 5 kiosks operational December 1, 2006 5. Pilot completed and data analyzed March 15, 2007 6. Functional prototype March 31, 2007 7. Series A funding finalized June 30, 2007 Risks Factors You should carefully consider the risks and uncertainties described below before you decide to buy shares. While these are the risks and uncertainties we believe are most important for you to consider, you should know that they are not the only ones facing us. If any of the following risks actually occurs, our business, financial condition or results of operations would likely suffer. In these circumstances, the value of our stock could decline, and you could lose all or part of the money you paid to buy our stock. Risks Related to Our Business We have no operating history. To date we have engaged primarily in finalizing our business plan, developing our products and services, establishing the corporate and other formalities necessary to begin operations, and building a sales pipeline. Accordingly, we have no operating history on which to base an evaluation of our business and prospects. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their early stages of development. We cannot assure you that we will be successful in addressing the risks we may encounter, and our failure to do so could have a material adverse effect on our business, prospects, financial condition and results of operations. Our business plan is dependent on state laws and regulations Even if we are successful in the development of our company, our success will depend upon the laws and regulations in each state. There is no national body that can approve this solution. This type of solution while considered under the central fill and shared services guidelines is not specifically addressed by the Boards of Pharmacy. It has been allowed in two states – NY and CT, and our initial legal review by external counsel did not identify any issues in MO. We will need to expand our skilled personnel and retain those personnel that we do hire. We will be required to hire and retain skilled employees (i.e., pharmacists and pharmacy technicians) in a market where such qualified employees are in high demand and are subject to receiving competing offers. The inability to hire needed employees on a timely basis and/or the inability to retain those that we do hire could have a material adverse effect on our ability to meet the schedules of its strategic plan.
  • Proprietary & Confidential © 2006 CentralScript, Inc.31 We will need to successfully manage our rapid growth and gain access to additional capital. We plan on growing at a rapid pace, which will require, in part, the constant addition of new personnel in all areas of our operations along with capital. Even if we are successful in finding and hiring the appropriate personnel, there will be a significant strain placed on our managerial, operation, reporting, and financial resources. We will use this start-up period to put in place the necessary legal, accounting, human resource management, and other relationships and tools to enable us to deal with this growth more efficiently. However, there is no assurance that we will be able to successfully manage this rapid growth. We will need to develop our own intellectual property. While having access to the Duane Reade kiosk allows us to start quickly, we cannot be captive to them in any capacity. If appropriate, we will need to acquire their intellectual property, and ultimately, to grow our value proposition and differentiation, we will need to successfully develop a next generation kiosk. We will leverage our CTO’s experience with the kiosk business, but there is no assurance that we can do this successfully. Additionally, if we cannot come to terms with Duane Reade about their business and they receive a patent, our solution may have to be revised which could impact our forecasts. We may find integration to be more challenging than expected. Being able to work across pharmacy systems and adjudicate under multiple NABPs is important. If we are not able to use Internet-based solutions or get direct access, we will have to build out a customer integration which may be both costly and difficult. We may find it difficult to get our target population to use the kiosk. Although the kiosk has met with success in New York, there is the question of how that applies to St. Louis and other markets. Kiosks are being rapidly rolled out for many functions. If this is not adopted and we cannot drive adoption, our model may be negatively impacted. Our pilot may have to be successful to get pharmacies to pay for the prescriptions and the kiosks. As a service and technology provider, we anticipate a fixed and variable pricing model. If we cannot demonstrate value in the pilot, pharmacies may not be willing to pay for the current model. Risks Related to this Offering There is no public market for our securities and there will be restrictions on the transferability of our Shares. There is currently no public market for any of our securities. We cannot assure you that any such public market will ever develop. Moreover, even if a public market does develop, any sale of our Shares may be made only pursuant to an effective registration statement under federal and applicable state securities laws or exemptions from such laws. In addition, our shares are subject to restrictions set forth in our Shareholder Agreement. We will have to raise additional capital to grow which will dilute your ownership. To meet our projections we will have to go through multiple rounds of institutional investment. Depending upon the market conditions, company performance, and terms of those deals, your ownership and financial return may be impacted.
  • Proprietary & Confidential © 2006 CentralScript, Inc.32 Appendix H: Financials The following tables show the proforma for the initial 24 months in detail along with the subsequent 3 years in aggregate. A cash flow statement and balance sheet for the first five years are also provided. The major assumptions and key comments supporting these spreadsheets are below. As models, these are highly subjective. 1. Assumes a continuous business model based on the current interactive kiosk. It does not include the potential revenues from dispensing OTCs, samples, and/or pre-packaged drugs. 2. Assumes that prescription volume varies based on the location of the kiosk from 200 per kiosk per month to 400 per kiosk per month. This is based upon Duane Reade’s experience and our perception of opportunities for growth. 3. Assumed 1 pharmacy technician per 8 kiosks with 1 technician per 16 kiosks during the 3rd shift. 4. Assumed 1 pharmacist per 10 technicians. 5. Assumed a kiosk rental fee of $1000 per kiosk per month in the initial months. Assumed it would move to a standard price of $1500 per kiosk per month going forward, but that this would only be collected on 75% of kiosks. 6. Assumed a 5% increase in pricing per year. 7. Assumed $200 per month per kiosk for maintenance and remote monitoring based on Duane Reade’s current contracts. 8. Assumed $150 per month per kiosk payment for licensing to Duane Reade and $100 per month fee for those kiosks located at medical facilities (i.e., rent). 9. Assumed a marketing budget of $10,000 per month ramping up over time. In year three, this jumps while we assume marketing and signage will replace the need for physical greeters at the kiosk. 10. Assumed we would use greeters at the kiosks during year one and two. 11. Assumed kiosk development costs of $500,000 in year one to develop the prototype; $2,500,000 in year two for final development and testing; and an ongoing development cost of $500,000 per year. 12. Assumed a $2,000,000 purchase of Duane Reade’s business in year two and subsequently eliminated the licensing fee and mark-up of the kiosk over actual production costs. 13. Assumed basic software purchases and estimated hardware and telecom costs. 14. The cost of options are not represented in the spreadsheet.
  • Proprietary & Confidential © 2006 CentralScript, Inc.33 Month 1 2 3 4 5 6 Employer Kiosks (200/mo.) 0 0 0 0 2 2 Physician / Hospital Kiosks (400/mo.) 0 0 0 0 0 0 Retail Kiosks (300/mo.) 0 0 0 0 3 3 Retirement Kiosks (200/mo.) 0 0 0 0 0 0 Number of New Rxs - - - - 1,300 1,300 Number of pharmacy techs needed (1:8 kiosks) * 2.5 shifts - - - 2 2 2 Number of pharmacists needed (1:8 techs) 3 3 3 Corporate staff 7 7 7 7 7 7 Revenue (5% annual pricing increase) Kiosk Rental ($1,000/mth yr 1) -$ -$ -$ -$ 3,750$ 3,750$ Per New Rx ($6.50/Rx) -$ -$ -$ -$ 8,450$ 8,450$ Advertising ($10/day) -$ -$ -$ -$ 1,500$ 1,500$ Total Revenue -$ -$ -$ -$ 13,700$ 13,700$ Operating Expense Staffing Pharmacy Techs -$ -$ -$ 5,000$ 5,000$ 5,000$ Pharmacists -$ -$ -$ 27,083$ 27,083$ 27,083$ Pharmacy Mgrs (1:10) Benefits (22% of salary) -$ -$ -$ 7,058$ 7,058$ 7,058$ Annual Bonus Accrual (10%) -$ -$ -$ 3,208$ 3,208$ 3,208$ Kiosk Delivery ($2000 per) -$ -$ -$ -$ 10,000$ -$ Kiosk Mgmt -$ -$ -$ -$ 1,000$ 1,000$ DSL per kiosk -$ -$ -$ -$ 750$ 750$ Kiosk per Rx fee -$ -$ -$ -$ 750$ 750$ T1s 2,000$ 2,000$ 2,000$ Real estate costs (medical buildings at $100/mo) -$ -$ -$ -$ -$ -$ Pharmacy license 1,000$ Sales & Marketing Expenses Staffing Sales VP Sales Directors (4) Kiosk Greeters -$ 6,250$ 6,250$ Benefits (22% of salary) -$ -$ -$ -$ 1,375$ 1,375$ Annual Bonus Accrual (20%) -$ -$ -$ -$ 1,250$ 1,250$ Marketing materials / research 10,000$ 10,000$ 10,000$ 10,000$ 10,000$ 10,000$ General & Administrative Expenses Staffing CEO 10,000$ 10,000$ 10,000$ 10,000$ 10,000$ 10,000$ CIO 8,333$ 8,333$ 8,333$ 8,333$ 8,333$ 8,333$ CFO COO 8,333$ 8,333$ 8,333$ 8,333$ CTO Controller IS developer (s) 5,417$ 5,417$ 5,417$ 5,417$ VP Marketing VP HR Lawyer Tech support (2) 3,333$ 3,333$ 3,333$ Additional staff (fin, mktg, tech) Admin (s) Analyst (s) Benefits (22% of salary) 4,033$ 4,033$ 7,058$ 7,792$ 7,792$ 7,792$ Annual Bonus Accrual (30%) - mgmt Annual Bonus Accrual (20%) - non-mgmt -$ -$ 1,083$ 1,750$ 1,750$ 1,750$ Legal Fees 20,000$ 10,000$ 2,500$ 2,500$ 2,500$ 2,500$ Kiosk HW/SW Development 50,000$ 100,000$ 100,000$ 100,000$ 100,000$ Travel (fund raising, selling) 3,000$ 3,000$ 3,000$ 3,000$ 3,000$ 3,000$ Finance / Accounting Fees 1,000$ 1,000$ 1,000$ 1,000$ 1,000$ 1,000$ Board of Directors (comp & expenses) 5,000$ 5,000$ Office space 2,500$ 2,500$ 2,500$ 2,500$ 2,500$ 2,500$ Utilities 1,250$ 1,250$ 1,250$ 1,250$ 1,250$ 1,250$ Supplies 3,500$ 105$ 105$ 184$ 184$ 184$ Business Insurance 1,000$ 1,000$ 2,000$ 2,000$ 2,000$ 2,000$ Worker's Compensation 149$ 149$ 260$ 547$ 597$ 597$ Total Costs 64,765$ 101,370$ 168,840$ 212,289$ 233,714$ 228,714$ EBITDA (64,765)$ (101,370)$ (168,840)$ (212,289)$ (220,014)$ (215,014)$ Depreciation Amortization (63)$ (682)$ (1,198)$ (1,554)$ (3,554)$ (3,679)$ Taxes (40%) -$ -$ -$ -$ -$ -$ Earnings (64,829)$ (102,053)$ (170,038)$ (213,842)$ (223,568)$ (218,694)$ Cumulative Earnings (64,829)$ (166,881)$ (336,920)$ (550,762)$ (774,330)$ (993,024)$ Balance Sheet Items Kiosks -$ -$ -$ -$ 62,500$ -$ Receptor site 5,000$ Call center software and HW -$ -$ 5,000$ 525$ 525$ Phone System 3,800$ Pharmacy software (license plus per user) 15,000$ 67$ 67$ 67$ Customer database (HW and SW) 20,000$ Purchase IP from Duane Reade PCs 1,118$ 1,118$ 1,118$ 1,176$ 1,176$ 1,176$ Server 1,287$ 1,287$ 1,287$ 1,287$ Office furniture 1,167$ 1,167$ 1,167$ 1,458$ 1,458$ 1,458$ 2,285$ 22,285$ 18,572$ 12,788$ 72,013$ 4,513$
  • Proprietary & Confidential © 2006 CentralScript, Inc.34 Month 7 8 9 10 11 12 Year One Employer Kiosks (200/mo.) 2 2 2 2 4 4 Physician / Hospital Kiosks (400/mo.) 0 0 0 0 2 2 Retail Kiosks (300/mo.) 3 3 3 3 5 5 Retirement Kiosks (200/mo.) 0 0 0 0 2 2 Number of New Rxs 1,300 1,300 1,300 1,300 3,500 3,500 14,800 Number of pharmacy techs needed (1:8 kiosks) * 2.5 shifts 2 2 2 2 5 5 Number of pharmacists needed (1:8 techs) 3 3 3 3 3 3 Corporate staff 7 7 7 7 7 7 Revenue (5% annual pricing increase) Kiosk Rental ($1,000/mth yr 1) 3,750$ 3,750$ 3,750$ 3,750$ 9,750$ 9,750$ 42,000$ Per New Rx ($6.50/Rx) 8,450$ 8,450$ 8,450$ 8,450$ 22,750$ 22,750$ 96,200$ Advertising ($10/day) 1,500$ 1,500$ 1,500$ 1,500$ 3,900$ 3,900$ 16,800$ Total Revenue 13,700$ 13,700$ 13,700$ 13,700$ 36,400$ 36,400$ 155,000$ Operating Expense Staffing Pharmacy Techs 5,000$ 5,000$ 5,000$ 5,000$ 12,656$ 12,656$ 60,313$ Pharmacists 27,083$ 27,083$ 27,083$ 27,083$ 25,000$ 25,000$ 239,583$ Pharmacy Mgrs (1:10) -$ Benefits (22% of salary) 7,058$ 7,058$ 7,058$ 7,058$ 8,284$ 8,284$ 65,977$ Annual Bonus Accrual (10%) 3,208$ 3,208$ 3,208$ 3,208$ 3,766$ 3,766$ 29,990$ Kiosk Delivery ($2000 per) -$ -$ -$ -$ 16,000$ -$ 26,000$ Kiosk Mgmt 1,000$ 1,000$ 1,000$ 1,000$ 2,600$ 2,600$ 11,200$ DSL per kiosk 750$ 750$ 750$ 750$ 1,950$ 1,950$ 8,400$ Kiosk per Rx fee 750$ 750$ 750$ 750$ 1,650$ 1,650$ 7,800$ T1s 2,000$ 2,000$ 2,000$ 2,000$ 2,000$ 2,000$ 18,000$ Real estate costs (medical buildings at $100/mo) -$ -$ -$ -$ 200$ 200$ 400$ Pharmacy license 1,000$ Sales & Marketing Expenses Staffing Sales VP -$ Sales Directors (4) -$ Kiosk Greeters 6,250$ 6,250$ 6,250$ 6,250$ 16,250$ 16,250$ 70,000$ Benefits (22% of salary) 1,375$ 1,375$ 1,375$ 1,375$ 3,575$ 3,575$ 15,400$ Annual Bonus Accrual (20%) 1,250$ 1,250$ 1,250$ 1,250$ 3,250$ 3,250$ 14,000$ Marketing materials / research 10,000$ 20,000$ 20,000$ 20,000$ 20,000$ 20,000$ 170,000$ General & Administrative Expenses Staffing CEO 10,000$ 10,000$ 10,000$ 10,000$ 10,000$ 10,000$ 120,000$ CIO 8,333$ 8,333$ 8,333$ 8,333$ 8,333$ 8,333$ 100,000$ CFO -$ COO 8,333$ 8,333$ 8,333$ 8,333$ 8,333$ 8,333$ 83,333$ CTO Controller 5,833$ 5,833$ 11,667$ IS developer (s) 5,417$ 5,417$ 5,417$ 5,417$ 5,417$ 5,417$ 54,167$ VP Marketing -$ VP HR -$ Lawyer -$ Tech support (2) 3,333$ 3,333$ 3,333$ 3,333$ 3,333$ 3,333$ 30,000$ Additional staff (fin, mktg, tech) -$ Admin (s) 3,333$ 3,333$ 3,333$ 3,333$ 3,333$ 3,333$ 20,000$ Analyst (s) -$ Benefits (22% of salary) 8,525$ 8,525$ 8,525$ 8,525$ 9,808$ 9,808$ 92,217$ Annual Bonus Accrual (30%) - mgmt 50,000$ 50,000$ Annual Bonus Accrual (20%) - non-mgmt 2,417$ 2,417$ 2,417$ 2,417$ 3,583$ 3,583$ 23,167$ Legal Fees 2,500$ 2,500$ 2,500$ 15,000$ 2,500$ 2,500$ 67,500$ Kiosk HW/SW Development 50,000$ 500,000$ Travel (fund raising, selling) 3,000$ 5,000$ 5,000$ 5,000$ 5,000$ 5,000$ 46,000$ Finance / Accounting Fees 1,000$ 2,500$ 2,500$ 2,500$ 2,500$ 2,500$ 19,500$ Board of Directors (comp & expenses) 5,000$ 5,000$ 20,000$ Office space 2,500$ 2,500$ 2,500$ 2,500$ 2,500$ 2,500$ 30,000$ Utilities 1,250$ 1,250$ 1,250$ 1,250$ 1,250$ 1,250$ 15,000$ Supplies 184$ 184$ 184$ 184$ 226$ 226$ 5,448$ Business Insurance 2,000$ 2,001$ 2,002$ 2,003$ 2,004$ 2,005$ 22,015$ Worker's Compensation 624$ 624$ 624$ 624$ 798$ 798$ 6,391$ Total Costs 178,475$ 141,976$ 146,977$ 154,478$ 191,934$ 230,935$ 2,054,467$ EBITDA (164,775)$ (128,276)$ (133,277)$ (140,778)$ (155,534)$ (194,535)$ (1,899,467)$ Depreciation Amortization (3,805)$ (4,763)$ (4,889)$ (5,014)$ (8,582)$ (9,000)$ (46,785)$ Taxes (40%) -$ -$ -$ -$ -$ -$ -$ Earnings (168,579)$ (133,039)$ (138,166)$ (145,792)$ (164,116)$ (203,535)$ (1,946,252)$ Cumulative Earnings (1,161,604)$ (1,294,643)$ (1,432,808)$ (1,578,600)$ (1,742,716)$ (1,946,252)$ Balance Sheet Items Kiosks -$ -$ -$ -$ 56,000$ -$ 118,500$ Receptor site -$ 16,000$ -$ 21,000$ Call center software and HW 525$ 525$ 525$ 525$ 806$ 806$ 9,763$ Phone System -$ -$ -$ 1,406$ -$ 5,206$ Pharmacy software (license plus per user) 67$ 30,067$ 67$ 67$ 169$ 169$ 45,804$ Customer database (HW and SW) 50,000$ 10,000$ 80,000$ Purchase IP from Duane Reade -$ PCs 1,176$ 1,176$ 1,176$ 1,176$ 1,172$ 1,172$ 13,929$ Server 1,287$ 1,287$ 1,287$ 1,287$ 1,287$ 1,287$ 12,870$ Office furniture 1,458$ 1,458$ 1,458$ 1,458$ 1,615$ 1,615$ 16,938$ 4,513$ 34,513$ 4,513$ 4,513$ 128,454$ 15,048$ 324,010$
  • Proprietary & Confidential © 2006 CentralScript, Inc.35 Month 13 14 15 16 17 18 Employer Kiosks (200/mo.) 7 10 13 16 19 22 Physician / Hospital Kiosks (400/mo.) 5 8 11 14 17 20 Retail Kiosks (300/mo.) 10 15 20 25 30 35 Retirement Kiosks (200/mo.) 4 6 8 10 12 14 Number of New Rxs 7,200 10,900 14,600 18,300 22,000 25,700 Number of pharmacy techs needed (1:8 kiosks) * 2.5 shifts 9 13 17 21 25 29 Number of pharmacists needed (1:8 techs) 4 5 5 6 6 7 Corporate staff 23 23 23 23 23 23 Revenue (5% annual pricing increase) Kiosk Rental ($1,000/mth yr 1) 30,713$ 46,069$ 61,425$ 76,781$ 92,138$ 107,494$ Per New Rx ($6.50/Rx) 49,140$ 74,393$ 99,645$ 124,898$ 150,150$ 175,403$ Advertising ($10/day) 8,190$ 12,285$ 16,380$ 20,475$ 24,570$ 28,665$ Total Revenue 88,043$ 132,746$ 177,450$ 222,154$ 266,858$ 311,561$ Operating Expense Staffing Pharmacy Techs 22,813$ 32,969$ 43,125$ 53,281$ 63,438$ 73,594$ Pharmacists 34,505$ 38,737$ 42,969$ 47,201$ 51,432$ 55,664$ Pharmacy Mgrs (1:10) 4,563$ 6,594$ 8,625$ 10,656$ 12,688$ 14,719$ Benefits (22% of salary) 13,614$ 17,226$ 20,838$ 24,450$ 28,063$ 31,675$ Annual Bonus Accrual (10%) 6,188$ 7,830$ 9,472$ 11,114$ 12,756$ 14,398$ Kiosk Delivery ($2000 per) 26,000$ 26,000$ 26,000$ 26,000$ 26,000$ 26,000$ Kiosk Mgmt 5,200$ 7,800$ 10,400$ 13,000$ 15,600$ 18,200$ DSL per kiosk 3,900$ 5,850$ 7,800$ 9,750$ 11,700$ 13,650$ Kiosk per Rx fee -$ -$ -$ -$ -$ -$ T1s 8,667$ 13,000$ 17,333$ 21,667$ 26,000$ 30,333$ Real estate costs (medical buildings at $100/mo) 500$ 800$ 1,100$ 1,400$ 1,700$ 2,000$ Pharmacy license 50,000$ Sales & Marketing Expenses Staffing Sales VP 10,000$ 10,000$ 10,000$ 10,000$ 10,000$ 10,000$ Sales Directors (4) 26,667$ 26,667$ 26,667$ 26,667$ 26,667$ 26,667$ Kiosk Greeters 52,500$ 65,000$ 97,500$ 97,500$ 97,500$ 97,500$ Benefits (22% of salary) 19,617$ 22,367$ 29,517$ 29,517$ 29,517$ 29,517$ Annual Bonus Accrual (20%) 17,833$ 20,333$ 26,833$ 26,833$ 26,833$ 26,833$ Marketing materials / research 30,000$ 30,000$ 30,000$ 30,000$ 30,000$ 30,000$ General & Administrative Expenses Staffing CEO 12,500$ 12,500$ 12,500$ 12,500$ 12,500$ 12,500$ CIO 11,667$ 11,667$ 11,667$ 11,667$ 11,667$ 11,667$ CFO 10,000$ 10,000$ 10,000$ 10,000$ 10,000$ 10,000$ COO 11,667$ 11,667$ 11,667$ 11,667$ 11,667$ 11,667$ CTO Controller 5,833$ 5,833$ 5,833$ 5,833$ 5,833$ 5,833$ IS developer (s) 16,250$ 16,250$ 16,250$ 16,250$ 16,250$ 16,250$ VP Marketing 9,167$ 9,167$ 9,167$ 9,167$ 9,167$ 9,167$ VP HR 7,500$ 7,500$ 7,500$ 7,500$ 7,500$ 7,500$ Lawyer Tech support (2) 6,667$ 6,667$ 6,667$ 6,667$ 6,667$ 6,667$ Additional staff (fin, mktg, tech) Admin (s) 6,667$ 6,667$ 6,667$ 6,667$ 6,667$ 6,667$ Analyst (s) 13,333$ 13,333$ 13,333$ 13,333$ 13,333$ 13,333$ Benefits (22% of salary) 24,475$ 24,475$ 24,475$ 24,475$ 24,475$ 24,475$ Annual Bonus Accrual (30%) - mgmt 13,750$ 22,250$ 22,250$ 22,250$ 22,250$ 22,250$ Annual Bonus Accrual (20%) - non-mgmt 13,083$ 13,083$ 13,083$ 13,083$ 13,083$ 13,083$ Legal Fees 5,000$ 5,000$ 5,000$ 5,000$ 5,000$ 5,000$ Kiosk HW/SW Development 208,333$ 208,333$ 208,333$ 208,333$ 208,333$ 208,333$ Travel (fund raising, selling) 5,000$ 5,000$ 5,000$ 5,000$ 5,000$ 5,000$ Finance / Accounting Fees 2,500$ 2,500$ 2,500$ 2,500$ 2,500$ 2,500$ Board of Directors (comp & expenses) 5,000$ 5,000$ Office space 4,375$ 4,375$ 4,375$ 4,375$ 4,375$ 4,375$ Utilities 2,188$ 2,188$ 2,188$ 2,188$ 2,188$ 2,188$ Supplies 544$ 613$ 681$ 750$ 818$ 887$ Business Insurance 2,006$ 2,007$ 2,008$ 2,009$ 2,010$ 2,011$ Worker's Compensation 2,125$ 2,359$ 2,755$ 2,888$ 3,021$ 3,154$ Total Costs 727,194$ 734,605$ 817,077$ 843,136$ 874,196$ 910,255$ EBITDA (639,151)$ (601,858)$ (639,627)$ (620,983)$ (607,338)$ (598,694)$ Depreciation Amortization (13,862)$ (18,739)$ (23,640)$ (28,564)$ (33,512)$ (38,484)$ Taxes (40%) -$ -$ -$ -$ -$ -$ Earnings (653,014)$ (620,597)$ (663,267)$ (649,547)$ (640,851)$ (637,178)$ Cumulative Earnings (2,599,265)$ (3,219,863)$ (3,883,129)$ (4,532,676)$ (5,173,527)$ (5,810,705)$ Balance Sheet Items Kiosks 91,000$ 91,000$ 91,000$ 91,000$ 91,000$ 91,000$ Receptor site 26,000$ 26,000$ 26,000$ 26,000$ 26,000$ 26,000$ Call center software and HW 1,327$ 1,784$ 2,241$ 2,698$ 3,155$ 3,612$ Phone System 2,602$ 2,285$ 2,285$ 2,285$ 2,285$ 2,285$ Pharmacy software (license plus per user) 304$ 440$ 575$ 710$ 846$ 981$ Customer database (HW and SW) 10,000$ 10,000$ 10,000$ 10,000$ 10,000$ 10,000$ Purchase IP from Duane Reade 166,667$ 166,667$ 166,667$ 166,667$ 166,667$ 166,667$ PCs 3,748$ 3,757$ 3,766$ 3,775$ 3,784$ 3,793$ Server 2,145$ 2,145$ 2,145$ 2,145$ 2,145$ 2,145$ Office furniture 4,570$ 4,824$ 5,078$ 5,332$ 5,586$ 5,840$ 308,362$ 308,901$ 309,756$ 310,612$ 311,467$ 312,322$
  • Proprietary & Confidential © 2006 CentralScript, Inc.36 Month 19 20 21 22 23 24 Year Two Employer Kiosks (200/mo.) 27 32 37 42 47 52 Physician / Hospital Kiosks (400/mo.) 25 30 35 40 45 50 Retail Kiosks (300/mo.) 45 55 65 75 85 95 Retirement Kiosks (200/mo.) 17 20 23 26 29 32 Number of New Rxs 32,300 38,900 45,500 52,100 58,700 65,300 391,500 Number of pharmacy techs needed (1:8 kiosks) * 2.5 shifts 37 44 51 58 65 73 Number of pharmacists needed (1:8 techs) 8 8 9 10 11 12 Corporate staff 23 23 23 23 23 23 Revenue (5% annual pricing increase) Kiosk Rental ($1,000/mth yr 1) 134,663$ 161,831$ 189,000$ 216,169$ 243,338$ 270,506$ 1,630,125$ Per New Rx ($6.50/Rx) 220,448$ 265,493$ 310,538$ 355,583$ 400,628$ 445,673$ 2,671,988$ Advertising ($10/day) 35,910$ 43,155$ 50,400$ 57,645$ 64,890$ 72,135$ 434,700$ Total Revenue 391,020$ 470,479$ 549,938$ 629,396$ 708,855$ 788,314$ 4,736,813$ Operating Expense Staffing Pharmacy Techs 91,563$ 109,531$ 127,500$ 145,469$ 163,438$ 181,406$ 1,108,125$ Pharmacists 63,151$ 70,638$ 78,125$ 85,612$ 93,099$ 100,586$ 761,719$ Pharmacy Mgrs (1:10) 18,313$ 21,906$ 25,500$ 29,094$ 32,688$ 36,281$ 221,625$ Benefits (22% of salary) 38,066$ 44,457$ 50,848$ 57,238$ 63,629$ 70,020$ 460,123$ Annual Bonus Accrual (10%) 17,303$ 20,208$ 23,113$ 26,017$ 28,922$ 31,827$ 209,147$ Kiosk Delivery ($2000 per) 46,000$ 46,000$ 46,000$ 46,000$ 46,000$ 46,000$ 432,000$ Kiosk Mgmt 22,800$ 27,400$ 32,000$ 36,600$ 41,200$ 45,800$ 276,000$ DSL per kiosk 17,100$ 20,550$ 24,000$ 27,450$ 30,900$ 34,350$ 207,000$ Kiosk per Rx fee -$ -$ -$ -$ -$ -$ -$ T1s 38,000$ 45,667$ 53,333$ 61,000$ 68,667$ 76,333$ 460,000$ Real estate costs (medical buildings at $100/mo) 2,500$ 3,000$ 3,500$ 4,000$ 4,500$ 5,000$ 30,000$ Pharmacy license 50,000$ Sales & Marketing Expenses Staffing Sales VP 10,000$ 10,000$ 10,000$ 10,000$ 10,000$ 10,000$ 120,000$ Sales Directors (4) 26,667$ 26,667$ 26,667$ 26,667$ 26,667$ 26,667$ 320,000$ Kiosk Greeters 122,500$ 147,500$ 172,500$ 172,500$ 172,500$ 172,500$ 1,467,500$ Benefits (22% of salary) 35,017$ 40,517$ 46,017$ 46,017$ 46,017$ 46,017$ 419,650$ Annual Bonus Accrual (20%) 31,833$ 36,833$ 41,833$ 41,833$ 41,833$ 41,833$ 381,500$ Marketing materials / research 30,000$ 30,000$ 30,000$ 30,000$ 30,000$ 30,000$ 360,000$ General & Administrative Expenses Staffing CEO 12,500$ 12,500$ 12,500$ 12,500$ 12,500$ 12,500$ 150,000$ CIO 11,667$ 11,667$ 11,667$ 11,667$ 11,667$ 11,667$ 140,000$ CFO 10,000$ 10,000$ 10,000$ 10,000$ 10,000$ 10,000$ 120,000$ COO 11,667$ 11,667$ 11,667$ 11,667$ 11,667$ 11,667$ 140,000$ CTO Controller 5,833$ 5,833$ 5,833$ 5,833$ 5,833$ 5,833$ 70,000$ IS developer (s) 16,250$ 16,250$ 16,250$ 16,250$ 16,250$ 16,250$ 195,000$ VP Marketing 9,167$ 9,167$ 9,167$ 9,167$ 9,167$ 9,167$ 110,000$ VP HR 7,500$ 7,500$ 7,500$ 7,500$ 7,500$ 7,500$ 90,000$ Lawyer -$ Tech support (2) 6,667$ 6,667$ 6,667$ 6,667$ 6,667$ 6,667$ 80,000$ Additional staff (fin, mktg, tech) -$ Admin (s) 6,667$ 6,667$ 6,667$ 6,667$ 6,667$ 6,667$ 80,000$ Analyst (s) 13,333$ 13,333$ 13,333$ 13,333$ 13,333$ 13,333$ 160,000$ Benefits (22% of salary) 24,475$ 24,475$ 24,475$ 24,475$ 24,475$ 24,475$ 293,700$ Annual Bonus Accrual (30%) - mgmt 22,250$ 22,250$ 22,250$ 22,250$ 22,250$ 22,250$ 258,500$ Annual Bonus Accrual (20%) - non-mgmt 13,083$ 13,083$ 13,083$ 13,083$ 13,083$ 13,083$ 157,000$ Legal Fees 5,000$ 5,000$ 5,000$ 5,000$ 5,000$ 5,000$ 60,000$ Kiosk HW/SW Development 208,333$ 208,333$ 208,333$ 208,333$ 208,333$ 208,333$ 2,500,000$ Travel (fund raising, selling) 5,000$ 5,000$ 5,000$ 5,000$ 5,000$ 5,000$ 60,000$ Finance / Accounting Fees 2,500$ 2,500$ 2,500$ 2,500$ 2,500$ 2,500$ 30,000$ Board of Directors (comp & expenses) 5,000$ 5,000$ 20,000$ Office space 4,375$ 4,375$ 4,375$ 4,375$ 4,375$ 4,375$ 52,500$ Utilities 2,188$ 2,188$ 2,188$ 2,188$ 2,188$ 2,188$ 26,250$ Supplies 1,008$ 1,129$ 1,251$ 1,372$ 1,493$ 1,614$ 12,160$ Business Insurance 2,012$ 2,013$ 2,014$ 2,015$ 2,016$ 2,017$ 24,138$ Worker's Compensation 3,592$ 4,030$ 4,467$ 4,703$ 4,938$ 5,173$ 43,205$ Total Costs 1,015,877$ 1,106,499$ 1,202,121$ 1,252,041$ 1,306,960$ 1,366,880$ 12,156,842$ EBITDA (624,857)$ (636,020)$ (652,184)$ (622,645)$ (598,105)$ (578,566)$ (7,420,029)$ Depreciation Amortization (46,047)$ (53,652)$ (61,299)$ (68,988)$ (76,718)$ (84,491)$ (547,996)$ Taxes (40%) -$ -$ -$ -$ -$ -$ -$ Earnings (670,904)$ (689,672)$ (713,482)$ (691,632)$ (674,824)$ (663,058)$ (7,968,026)$ Cumulative Earnings (6,481,609)$ (7,171,281)$ (7,884,764)$ (8,576,396)$ (9,251,220)$ (9,914,277)$ Balance Sheet Items Kiosks 161,000$ 161,000$ 161,000$ 161,000$ 161,000$ 161,000$ 1,512,000$ Receptor site 46,000$ 46,000$ 46,000$ 46,000$ 46,000$ 46,000$ 432,000$ Call center software and HW 4,420$ 5,229$ 6,038$ 6,846$ 7,655$ 8,463$ 53,466$ Phone System 4,043$ 4,043$ 4,043$ 4,043$ 4,043$ 4,043$ 38,285$ Pharmacy software (license plus per user) 1,221$ 1,460$ 1,700$ 1,940$ 2,179$ 2,419$ 14,775$ Customer database (HW and SW) 10,000$ 10,000$ 10,000$ 10,000$ 10,000$ 10,000$ 120,000$ Purchase IP from Duane Reade 166,667$ 166,667$ 166,667$ 166,667$ 166,667$ 166,667$ 2,000,000$ PCs 3,809$ 3,825$ 3,841$ 3,857$ 3,873$ 3,888$ 45,713$ Server 2,145$ 2,145$ 2,145$ 2,145$ 2,145$ 2,145$ 25,740$ Office furniture 6,289$ 6,738$ 7,188$ 7,637$ 8,086$ 8,535$ 75,703$ 405,594$ 407,107$ 408,620$ 410,134$ 411,647$ 413,160$ 4,317,682$
  • Proprietary & Confidential © 2006 CentralScript, Inc.37 Month 25 26 27 28 29 30 Employer Kiosks (200/mo.) 62 72 82 92 102 112 Physician / Hospital Kiosks (400/mo.) 60 70 80 90 100 110 Retail Kiosks (300/mo.) 110 125 140 155 170 185 Retirement Kiosks (200/mo.) 37 42 47 52 57 62 Number of New Rxs 76,800 88,300 99,800 111,300 122,800 134,300 Number of pharmacy techs needed (1:8 kiosks) * 2.5 shifts 85 98 110 123 135 148 Number of pharmacists needed (1:8 techs) 14 15 17 18 20 21 Corporate staff 27 27 27 27 27 27 Revenue (5% annual pricing increase) Kiosk Rental ($1,000/mth yr 1) 333,644$ 383,257$ 432,869$ 482,482$ 532,094$ 581,707$ Per New Rx ($6.50/Rx) 550,368$ 632,780$ 715,192$ 797,604$ 880,016$ 962,427$ Advertising ($10/day) 88,972$ 102,202$ 115,432$ 128,662$ 141,892$ 155,122$ Total Revenue 972,984$ 1,118,238$ 1,263,493$ 1,408,747$ 1,554,001$ 1,699,256$ Operating Expense Staffing Pharmacy Techs 212,656$ 243,906$ 275,156$ 306,406$ 337,656$ 368,906$ Pharmacists 113,607$ 126,628$ 139,648$ 152,669$ 165,690$ 178,711$ Pharmacy Mgrs (1:10) 42,531$ 48,781$ 55,031$ 61,281$ 67,531$ 73,781$ Benefits (22% of salary) 81,135$ 92,249$ 103,364$ 114,478$ 125,593$ 136,708$ Annual Bonus Accrual (10%) 36,879$ 41,932$ 46,984$ 52,036$ 57,088$ 62,140$ Kiosk Delivery ($2000 per) 80,000$ 80,000$ 80,000$ 80,000$ 80,000$ 80,000$ Kiosk Mgmt 53,800$ 61,800$ 69,800$ 77,800$ 85,800$ 93,800$ DSL per kiosk 40,350$ 46,350$ 52,350$ 58,350$ 64,350$ 70,350$ Kiosk per Rx fee -$ -$ -$ -$ -$ -$ T1s 89,667$ 103,000$ 116,333$ 129,667$ 143,000$ 156,333$ Real estate costs (medical buildings at $100/mo) 6,000$ 7,000$ 8,000$ 9,000$ 10,000$ 11,000$ Pharmacy license 50,000$ Sales & Marketing Expenses Staffing Sales VP 10,000$ 10,000$ 10,000$ 10,000$ 10,000$ 10,000$ Sales Directors (4) 26,667$ 26,667$ 26,667$ 26,667$ 26,667$ 26,667$ Kiosk Greeters Benefits (22% of salary) 8,067$ 8,067$ 8,067$ 8,067$ 8,067$ 8,067$ Annual Bonus Accrual (20%) 7,333$ 7,333$ 7,333$ 7,333$ 7,333$ 7,333$ Marketing materials / research 50,000$ 50,000$ 50,000$ 50,000$ 50,000$ 50,000$ General & Administrative Expenses Staffing CEO 12,500$ 12,500$ 12,500$ 12,500$ 12,500$ 12,500$ CIO 11,667$ 11,667$ 11,667$ 11,667$ 11,667$ 11,667$ CFO 10,000$ 10,000$ 10,000$ 10,000$ 10,000$ 10,000$ COO 11,667$ 11,667$ 11,667$ 11,667$ 11,667$ 11,667$ CTO Controller 5,833$ 5,833$ 5,833$ 5,833$ 5,833$ 5,833$ IS developer (s) 27,083$ 27,083$ 27,083$ 27,083$ 27,083$ 27,083$ VP Marketing 9,167$ 9,167$ 9,167$ 9,167$ 9,167$ 9,167$ VP HR 7,500$ 7,500$ 7,500$ 7,500$ 7,500$ 7,500$ Lawyer Tech support (2) 13,333$ 13,333$ 13,333$ 13,333$ 13,333$ 13,333$ Additional staff (fin, mktg, tech) Admin (s) 6,667$ 6,667$ 6,667$ 6,667$ 6,667$ 6,667$ Analyst (s) 13,333$ 13,333$ 13,333$ 13,333$ 13,333$ 13,333$ Benefits (22% of salary) 28,325$ 28,325$ 28,325$ 28,325$ 28,325$ 28,325$ Annual Bonus Accrual (30%) - mgmt 25,750$ 25,750$ 25,750$ 25,750$ 25,750$ 25,750$ Annual Bonus Accrual (20%) - non-mgmt 16,583$ 16,583$ 16,583$ 16,583$ 16,583$ 16,583$ Legal Fees 5,000$ 5,000$ 5,000$ 5,000$ 5,000$ 5,000$ Kiosk HW/SW Development 41,667$ 41,667$ 41,667$ 41,667$ 41,667$ 41,667$ Travel (fund raising, selling) 5,000$ 5,000$ 5,000$ 5,000$ 5,000$ 5,000$ Finance / Accounting Fees 2,500$ 2,500$ 2,500$ 2,500$ 2,500$ 2,500$ Board of Directors (comp & expenses) 5,000$ 5,000$ Office space 7,500$ 7,500$ 7,500$ 7,500$ 7,500$ 7,500$ Utilities 3,750$ 3,750$ 3,750$ 3,750$ 3,750$ 3,750$ Supplies 1,885$ 2,096$ 2,307$ 2,518$ 2,729$ 2,940$ Business Insurance 2,018$ 2,019$ 2,020$ 2,021$ 2,022$ 2,023$ Worker's Compensation 4,327$ 4,736$ 5,146$ 5,555$ 5,964$ 6,373$ Total Costs 1,181,747$ 1,227,389$ 1,328,031$ 1,418,673$ 1,514,315$ 1,614,957$ EBITDA (208,763)$ (109,151)$ (64,539)$ (9,926)$ 39,686$ 84,298$ Depreciation Amortization (96,416)$ (107,838)$ (119,333)$ (130,901)$ (142,543)$ (154,257)$ Taxes (40%) -$ -$ -$ -$ -$ -$ Earnings (305,179)$ (216,989)$ (183,872)$ (140,828)$ (102,857)$ (69,959)$ Cumulative Earnings (10,219,456)$ (10,436,445)$ (10,620,317)$ (10,761,145)$ (10,864,002)$ (10,933,961)$ Balance Sheet Items Kiosks 280,000$ 280,000$ 280,000$ 280,000$ 280,000$ 280,000$ Receptor site 80,000$ 80,000$ 80,000$ 80,000$ 80,000$ 80,000$ Call center software and HW 9,870$ 11,276$ 12,682$ 14,088$ 15,495$ 16,901$ Phone System 7,031$ 7,031$ 7,031$ 7,031$ 7,031$ 7,031$ Pharmacy software (license plus per user) 2,835$ 3,252$ 3,669$ 4,085$ 4,502$ 4,919$ Customer database (HW and SW) 10,000$ 10,000$ 10,000$ 10,000$ 10,000$ 10,000$ Purchase IP from Duane Reade PCs 4,555$ 4,583$ 4,611$ 4,638$ 4,666$ 4,694$ Server 25,000$ 4,290$ 4,290$ 4,290$ 4,290$ 4,290$ Office furniture 9,983$ 10,764$ 11,546$ 12,327$ 13,108$ 13,889$ 429,275$ 411,196$ 413,828$ 416,460$ 419,092$ 421,724$
  • Proprietary & Confidential © 2006 CentralScript, Inc.38 Month 31 32 33 34 35 36 Year Three Year 4 Year 5 Employer Kiosks (200/mo.) 122 132 142 152 162 172 172 250 350 Physician / Hospital Kiosks (400/mo.) 120 130 140 150 160 170 170 300 450 Retail Kiosks (300/mo.) 200 215 230 245 260 275 275 500 800 Retirement Kiosks (200/mo.) 67 72 77 82 87 92 92 150 200 Number of New Rxs 145,800 157,300 168,800 180,300 191,800 203,300 1,680,600 4,200,000 6,360,000 Number of pharmacy techs needed (1:8 kiosks) * 2.5 shifts 160 173 185 198 210 223 223 376 564 Number of pharmacists needed (1:8 techs) 23 25 26 28 29 31 31 50 73 Corporate staff 27 27 27 27 27 27 27 27 27 Revenue (5% annual pricing increase) Kiosk Rental ($1,000/mth yr 1) 631,319$ 680,932$ 730,544$ 780,157$ 829,769$ 879,382$ 7,278,154$ 18,753,552$ 29,536,812$ Per New Rx ($6.50/Rx) 1,044,839$ 1,127,251$ 1,209,663$ 1,292,075$ 1,374,487$ 1,456,899$ 12,043,600$ 31,603,163$ 50,249,028$ Advertising ($10/day) 168,352$ 181,582$ 194,812$ 208,042$ 221,272$ 234,502$ 1,940,841$ 5,000,940$ 7,876,481$ Total Revenue 1,844,510$ 1,989,764$ 2,135,019$ 2,280,273$ 2,425,528$ 2,570,782$ 21,262,595$ 55,357,655$ 87,662,321$ Operating Expense Staffing Pharmacy Techs 400,156$ 431,406$ 462,656$ 493,906$ 525,156$ 556,406$ 4,614,375$ 11,280,000$ 16,905,000$ Pharmacists 191,732$ 204,753$ 217,773$ 230,794$ 243,815$ 256,836$ 2,222,656$ 5,250,000$ 8,078,125$ Pharmacy Mgrs (1:10) 80,031$ 86,281$ 92,531$ 98,781$ 105,031$ 111,281$ 922,875$ 2,256,000$ 3,381,000$ Benefits (22% of salary) 147,822$ 158,937$ 170,051$ 181,166$ 192,281$ 203,395$ 1,707,179$ 4,132,920$ 6,240,108$ Annual Bonus Accrual (10%) 67,192$ 72,244$ 77,296$ 82,348$ 87,400$ 92,452$ 775,991$ 1,878,600$ 2,836,413$ Kiosk Delivery ($2000 per) 80,000$ 80,000$ 80,000$ 80,000$ 80,000$ 80,000$ 960,000$ 982,000$ 1,200,000$ Kiosk Mgmt 101,800$ 109,800$ 117,800$ 125,800$ 133,800$ 141,800$ 1,173,600$ 2,880,000$ 4,320,000$ DSL per kiosk 76,350$ 82,350$ 88,350$ 94,350$ 100,350$ 106,350$ 880,200$ 2,160,000$ 3,240,000$ Kiosk per Rx fee -$ -$ -$ -$ -$ -$ -$ -$ -$ T1s 169,667$ 183,000$ 196,333$ 209,667$ 223,000$ 236,333$ 1,956,000$ 4,800,000$ 7,200,000$ Real estate costs (medical buildings at $100/mo) 12,000$ 13,000$ 14,000$ 15,000$ 16,000$ 17,000$ 138,000$ 360,000$ 540,000$ Pharmacy license 50,000$ 50,000$ 50,000$ Sales & Marketing Expenses Staffing Sales VP 10,000$ 10,000$ 10,000$ 10,000$ 10,000$ 10,000$ 120,000$ 126,000$ 132,300$ Sales Directors (4) 26,667$ 26,667$ 26,667$ 26,667$ 26,667$ 26,667$ 320,000$ 336,000$ 336,000$ Kiosk Greeters -$ -$ -$ Benefits (22% of salary) 8,067$ 8,067$ 8,067$ 8,067$ 8,067$ 8,067$ 96,800$ 101,640$ 103,026$ Annual Bonus Accrual (20%) 7,333$ 7,333$ 7,333$ 7,333$ 7,333$ 7,333$ 88,000$ 92,400$ 93,660$ Marketing materials / research 50,000$ 50,000$ 50,000$ 50,000$ 50,000$ 50,000$ 600,000$ 1,000,000$ 1,500,000$ General & Administrative Expenses Staffing CEO 12,500$ 12,500$ 12,500$ 12,500$ 12,500$ 12,500$ 150,000$ 157,500$ 165,375$ CIO 11,667$ 11,667$ 11,667$ 11,667$ 11,667$ 11,667$ 140,000$ 147,000$ 154,350$ CFO 10,000$ 10,000$ 10,000$ 10,000$ 10,000$ 10,000$ 120,000$ 126,000$ 132,300$ COO 11,667$ 11,667$ 11,667$ 11,667$ 11,667$ 11,667$ 140,000$ 147,000$ 154,350$ CTO Controller 5,833$ 5,833$ 5,833$ 5,833$ 5,833$ 5,833$ 70,000$ 73,500$ 77,175$ IS developer (s) 27,083$ 27,083$ 27,083$ 27,083$ 27,083$ 27,083$ 325,000$ 204,750$ 214,988$ VP Marketing 9,167$ 9,167$ 9,167$ 9,167$ 9,167$ 9,167$ 110,000$ 115,500$ 121,275$ VP HR 7,500$ 7,500$ 7,500$ 7,500$ 7,500$ 7,500$ 90,000$ 94,500$ 99,225$ Lawyer -$ 150,000$ 157,500$ Tech support (2) 13,333$ 13,333$ 13,333$ 13,333$ 13,333$ 13,333$ 160,000$ 168,000$ 176,400$ Additional staff (fin, mktg, tech) -$ 288,750$ 303,188$ Admin (s) 6,667$ 6,667$ 6,667$ 6,667$ 6,667$ 6,667$ 80,000$ 84,000$ 88,200$ Analyst (s) 13,333$ 13,333$ 13,333$ 13,333$ 13,333$ 13,333$ 160,000$ 168,000$ 176,400$ Benefits (22% of salary) 28,325$ 28,325$ 28,325$ 28,325$ 28,325$ 28,325$ 339,900$ 423,390$ 444,560$ Annual Bonus Accrual (30%) - mgmt 25,750$ 25,750$ 25,750$ 25,750$ 25,750$ 25,750$ 309,000$ 384,900$ 404,145$ Annual Bonus Accrual (20%) - non-mgmt 16,583$ 16,583$ 16,583$ 16,583$ 16,583$ 16,583$ 199,000$ 438,078$ 459,982$ Legal Fees 5,000$ 5,000$ 5,000$ 5,000$ 5,000$ 5,000$ 60,000$ 25,000$ 25,000$ Kiosk HW/SW Development 41,667$ 41,667$ 41,667$ 41,667$ 41,667$ 41,667$ 500,000$ 500,000$ 500,000$ Travel (fund raising, selling) 5,000$ 5,000$ 5,000$ 5,000$ 5,000$ 5,000$ 60,000$ 100,000$ 200,000$ Finance / Accounting Fees 2,500$ 2,500$ 2,500$ 2,500$ 2,500$ 2,500$ 30,000$ 60,000$ 80,000$ Board of Directors (comp & expenses) 5,000$ 5,000$ 40,000$ 40,000$ 40,000$ Office space 7,500$ 7,500$ 7,500$ 7,500$ 7,500$ 7,500$ 90,000$ 135,000$ 165,000$ Utilities 3,750$ 3,750$ 3,750$ 3,750$ 3,750$ 3,750$ 45,000$ 67,500$ 82,500$ Supplies 3,151$ 3,362$ 3,573$ 3,784$ 3,995$ 4,206$ 36,547$ 81,540$ 119,509$ Business Insurance 2,024$ 2,025$ 2,026$ 2,027$ 2,028$ 2,029$ 24,282$ 36,000$ 36,000$ Worker's Compensation 6,782$ 7,192$ 7,601$ 8,010$ 8,419$ 8,829$ 78,934$ 146,268$ 215,221$ Total Costs 1,705,599$ 1,801,241$ 1,901,883$ 1,992,525$ 2,088,167$ 2,188,809$ 19,963,339$ 42,047,736$ 60,948,272$ EBITDA 138,911$ 188,523$ 233,136$ 287,748$ 337,360$ 381,973$ 1,299,255$ 13,309,919$ 26,714,049$ Depreciation Amortization (166,045)$ (177,906)$ (189,840)$ (201,847)$ (213,927)$ (226,080)$ (1,926,933)$ (3,636,194)$ (5,433,795)$ Taxes (40%) -$ -$ -$ -$ -$ -$ -$ -$ 8,164,809$ Earnings (27,134)$ 10,617$ 43,296$ 85,901$ 123,434$ 155,893$ (627,677)$ 9,673,725$ 13,115,444$ Cumulative Earnings (10,961,095)$ (10,950,478)$ (10,907,182)$ (10,821,281)$ (10,697,847)$ (10,541,955)$ (868,230)$ 12,247,214$ Balance Sheet Items Kiosks 280,000$ 280,000$ 280,000$ 280,000$ 280,000$ 280,000$ 3,360,000$ 3,437,000$ 4,200,000$ Receptor site 80,000$ 80,000$ 80,000$ 80,000$ 80,000$ 80,000$ 960,000$ 982,000$ 1,200,000$ Call center software and HW 18,307$ 19,713$ 21,120$ 22,526$ 23,932$ 25,338$ 211,247$ 511,200$ 764,325$ Phone System 7,031$ 7,031$ 7,031$ 7,031$ 7,031$ 7,031$ 84,375$ 86,309$ 105,469$ Pharmacy software (license plus per user) 5,335$ 5,752$ 6,169$ 6,585$ 7,002$ 7,419$ 61,525$ 150,400$ 225,400$ Customer database (HW and SW) 10,000$ 10,000$ 10,000$ 10,000$ 10,000$ 10,000$ 120,000$ 250,000$ 500,000$ Purchase IP from Duane Reade -$ -$ -$ PCs 4,722$ 4,749$ 4,777$ 4,805$ 4,833$ 4,860$ 56,493$ 5,201$ 5,617$ Server 4,290$ 4,290$ 4,290$ 4,290$ 4,290$ 4,290$ 72,190$ 60,000$ 60,000$ Office furniture 14,671$ 15,452$ 16,233$ 17,014$ 17,796$ 18,577$ 171,359$ 338,000$ 478,625$ 424,356$ 426,988$ 429,620$ 432,252$ 434,884$ 437,515$ 5,097,190$ 5,820,109$ 7,539,436$
  • Proprietary & Confidential © 2006 CentralScript, Inc.39 Cash Flow Statement Year One Year Two Year Three Year 4 Year 5 Net Income (Loss) (1,946,252) (7,968,026) (627,677) 9,673,725 13,115,444 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 46,785 547,996 1,926,933 3,636,194 5,433,795 Changes in operating assets and liabilities: Accounts Receivable (36,400) (751,914) (1,782,468) (2,042,356) (2,692,056) Net cash provided (used) by operating activities (1,935,867) (8,171,943) (483,213) 11,267,563 15,857,184 Investing activities Purchases of property and equipment (324,010) (2,502,987) (7,055,965) (10,201,634) (7,539,436) Purchase IP - - - - - Net cash provided (used) in investing activities (324,010) (2,502,987) (7,055,965) (10,201,634) (7,539,436) Financing Activities Revolving Line of Credit / (Cash) (11,340,123) 2,674,930 7,539,177 (1,065,928) (8,317,748) Equity Contribution 13,600,000 10,000,000 - - - Net cash provided (used) by financing activities 2,259,877 12,674,930 7,539,177 (1,065,928) (8,317,748) Cash and cash equivalents at end of period - (0) 0 - -
  • Proprietary & Confidential © 2006 CentralScript, Inc.40 Balance Sheet Year One Year Two Year Three Year 4 Year 5 CURRENT ASSETS Cash - - - - - Accounts Receivable 36,400 788,314 2,570,782 4,613,138 7,305,193 Prepaid Insurance Deposits Total Current Assets 36,400 788,314 2,570,782 4,613,138 7,305,193 FIXED ASSETS Kiosks 118,500 1,749,000 6,621,000 13,418,000 17,618,000 Computer Equipment 188,572 985,356 2,997,961 6,064,595 8,925,406 Furniture & Fixtures 16,938 92,641 264,000 602,000 1,080,625 Accumulated Depreciation (46,785) (522,559) (2,316,158) (5,819,019) (11,119,481) Net Fixed Assets 277,225 2,304,438 7,566,803 14,265,576 16,504,550 OTHER ASSETS Intellectual Property - acquired 2,000,000 2,000,000 2,000,000 2,000,000 Accum Amortization (15 years) - (72,222) (205,556) (338,889) (472,222) Total Other Assets - 1,927,778 1,794,444 1,661,111 1,527,778 Total Assets 313,625 5,020,529 11,932,029 20,539,825 25,337,521 CURRENT LIABILITIES Accounts Payable Accrued Other Accrued RE and PP Tax Balance (Cash)Line (11,340,123) (8,665,194) (1,126,016) (2,191,945) (10,509,693) Total Current Liabilities (11,340,123) (8,665,194) (1,126,016) (2,191,945) (10,509,693) LONG TERM DEBT Total Liabilities (11,340,123) (8,665,194) (1,126,016) (2,191,945) (10,509,693) STOCKHOLDER'S EQUITY Paid in Equity / Common Stock 13,600,000 23,600,000 23,600,000 23,600,000 23,600,000 Distributions - - - - - Retained Earnings - (1,946,252) (9,914,277) (10,541,955) (868,230) Net Profit/(Loss) (1,946,252) (7,968,026) (627,677) 9,673,725 13,115,444 Total Equity 11,653,748 13,685,723 13,058,045 22,731,770 35,847,214 Total Liabilities and Equity 313,625 5,020,529 11,932,029 20,539,825 25,337,521